Conservation of electronic communications resources and computing resources via selective processing of substantially continuously updated data

ABSTRACT

In a system including a primary process followed by a secondary process, which are performed serially and sequentially, i.e., in a FIFO manner, where the secondary process is downstream of the primary process, the disclosed embodiments relate to selective/conditional secondary processing of electronic data transaction request messages, which speeds up the primary processing of the electronic data transaction request messages, reduces reduce the amount of computing resources wasted on calculating inaccurate information, and reducing the usage of network resources associated with publishing market data feeds and receiving new responsive messages.

REFERENCE TO RELATED APPLICATIONS

This application claims priority to and the benefit as a continuation ofU.S. patent application Ser. No. 16/667,124, filed Oct. 29, 2019,entitled, “CONSERVATION OF ELECTRONIC COMMUNICATIONS RESOURCES ANDCOMPUTING RESOURCES VIA SELECTIVE PROCESSING OF SUBSTANTIALLYCONTINUOUSLY UPDATED DATA”, now U.S. patent Ser. No. ______, issued______, which is a continuation of U.S. patent application Ser. No.15/954,169, filed Apr. 16, 2018, entitled, “CONSERVATION OF ELECTRONICCOMMUNICATIONS RESOURCES AND COMPUTING RESOURCES VIA SELECTIVEPROCESSING OF SUBSTANTIALLY CONTINUOUSLY UPDATED DATA”, now U.S. Pat.No. 10,503,566, issued Dec. 10, 2019, the entirety of which areincorporated by reference herein and relied upon.

BACKGROUND

Many systems that process requests from users include multipleprocessing stages or steps, or multiple applications, that are executedin a sequential order, the results of which are thereafter published orreported to users. If a later processing stage or step (e.g., secondaryprocessing) experiences a delay, or requires more time for processing amessage than an earlier stage (e.g., primary processing), the laterprocessing stage (e.g., secondary processing, or downstream processing)becomes a bottleneck in the overall processing system. The bottleneckmay delay the speed with which the primary processing isreported/published to users. In a system where users desire primaryprocessing to be performed and completed/reported as soon as possible,e.g., in real-time or near-real time, e.g., as close to the rate atwhich incoming requests are received, a bottleneck in the secondaryprocessing may cause primary processing results to be inaccurate and maycause the secondary processing to become unnecessary.

More particularly, an electronic data transaction processing system mayreceive requests to transact from users via a communications network andmay process those requests against other such received requests in orderto facilitate transactions among users. Such systems may use datagenerators to publish and transmit electronic messages via thecommunications network to those users who submit requests to the datatransaction processing system, these messages being reflective of thestatus of the processing of the received requests. In systems whichreceive a high volume of transaction requests, and thereby process ahigh volume of transactions, the processing of a given transactionrequest may result in a significant number of transactions beingprocessed and correspondingly result in generation and transmission of asignificant number of messages reflective thereof. These resultmessages, which reflect the status and effect of the transactionrequests, are then provided to the users over a communications network.As users place more transaction requests, the volume of data beingcommunicated back to the users increases as well, increasing the burdenon the communication infrastructure and supporting resources that areused to generate and transmit the communications. During peak volumetimes, the data transaction processing system cannot process/respond totransaction requests at the rate of incoming transaction requests. Theresult messages begin to lag the request messages, and may no longer beable to represent accurate or actionable information, because therequest messages may not account for newly received request messages.Not only does the information published by the data transactionprocessing system become inaccurate (e.g., if a user tries to perform anaction based on the information, the action cannot be performed), thesecondary processing or downstream processing of older request messagesbecomes wasteful and unnecessary.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 depicts a computer network system, according to some embodiments.

FIG. 2 depicts a general computer system, according to some embodiments.

FIG. 3A depicts a storage data structure, according to some embodiments.

FIG. 3B depicts another storage data structure, according to someembodiments.

FIG. 3C depicts yet another data structure, according to someembodiments.

FIG. 4A depicts a match engine module, according to some embodiments.

FIG. 4B depicts another match engine module, according to someembodiments.

FIGS. 5A-5E depicts an example exchange computing system.

FIG. 6 depicts another example exchange computing system, according tosome embodiments.

FIG. 7 illustrates a data transaction processing system including FIFOpipelined processing components, according to some embodiments.

FIGS. 8A and 8B depicts a high-level flowchart illustrating a method ofinterrupting processing of electronic data transaction messages in adata transaction processing system, according to some embodiments.

DETAILED DESCRIPTION

The disclosed embodiments relate to the electronic communication ofmessages via a communications network reflective of substantiallycontinuously updated data in an electronic transaction processingsystem. The disclosed embodiments conserve computing resources, e.g.,CPU cycles in a computer, as well as electronic communicationsresources, e.g. bandwidth, while preserving real time delivery ofcritical data via selective and/or conditional downstream processing ofmessages.

In particular, in a system including a primary process followed by asecondary process, which are performed serially and sequentially, i.e.,in a FIFO manner, where the secondary process is downstream of theprimary process, the disclosed embodiments relate toselective/conditional secondary processing of electronic datatransaction request messages, which speeds up the primary processing ofthe electronic data transaction request messages. Users of the systemmay desire that primary processing is performed and reported as soon aspossible, e.g., in real-time or near-real time, e.g., as close aspossible to the rate at which incoming requests are received. It will beappreciated that the result messages based on the primary processingdescribed herein may be generated in real time, e.g. as transactionrequests are received and/or as transactions are processed, orsubstantially proximate thereto, such that the primary processing may bereferred to as “substantially continuous” or otherwise occurring in realtime, or near-real time, e.g., as close as possible to the rate at whichincoming requests are received by the data transaction processingsystem.

It should be appreciated that in a FIFO process, multiple differentprocesses may asymmetrically execute different (related) messagessimultaneously, but at different speeds/rates, e.g., due to thebottlenecking at a downstream process.

The disclosed embodiments may be implemented to eliminate the downstreamprocessing of messages that may no longer be actionable by users,thereby reducing the amount of computing resources expended by the datatransaction processing system, improving the response time of theupstream (i.e., primary processing) for incoming request messages. Thedisclosed embodiments also reduce the amount of reporting messages basedon the secondary processing that are transmitted from the datatransaction processing system to users of the data transactionprocessing system, thereby reducing the usage of network resources byeliminating the volume of incoming and outgoing messages.

The disclosed embodiments improve the technical fields of dataprocessing in a continuously changing data environment by a pipelined,deterministic system including FIFO processing stages having varyinglatencies and communications of results thereof. At least some of theproblems solved by the disclosed embodiments are specifically rooted intechnology, namely, problems arising from computationally expensive andtime consuming processes in a multi-stage, pipelined, deterministicapplication causing processing delays, such delays thereby causing datato become outdated and inaccurate, where the different processing stagesmay simultaneously process different, but related, messages at differentrates, and are solved by an architectural improvement implementingsynchronization and state comparison components for eliminatingprocessing of outdated information as discussed herein. The disclosedembodiments are a specific implementation and practical application thatmay include a “lookback feature” that enables a later receivedtransaction to affect a previously received transaction that is still inprocess, and in particular, decouples or de-pipelines the earliertransaction to remove the processing-impediment caused thereby to theprocessing of subsequently received transactions, whereby a placeholdertransaction is maintained and the de-pipelined transaction is processedout of band to preserve overall deterministic operation to an outsideobserver. Later transactions are then permitted to overtake ade-pipelined operation.

For example, one exemplary environment where the disclosed embodimentsmay be desirable is in financial markets, and in particular, electronicfinancial exchanges, such as a futures exchange, such as the ChicagoMercantile Exchange Inc. (CME).

A trading environment, such as a futures exchange as described herein,implements one or more economic markets where rights and obligations maybe traded. As such, a trading environment may be characterized by a needto maintain market integrity, transparency, predictability,fair/equitable access and participant expectations with respect thereto.For example, an exchange must respond to inputs, such as trader orders,cancellation, etc., in a manner as expected by the market participants,such as based on market data, e.g. prices, available counter-orders,etc., to provide an expected level of certainty that transactions willoccur in a consistent and predictable manner. In addition, it will beappreciated that electronic trading systems further impose additionalexpectations and demands by market participants as to transactionprocessing speed, latency, capacity, and response time, while creatingadditional complexities relating thereto. Accordingly, as will bedescribed, the disclosed embodiments may further include functionalityto ensure that the expectations of market participant are met, e.g. thatpredictable system responses are maintained.

In particular, the disclosed embodiments eliminate secondary ordownstream processing in a pipelined, deterministic system, and reducethe amount of electronic data transaction result messages communicatedfrom the financial exchange to market participants whereby messages, orat least a portion of the content thereof, indicative of changes in themarket, due to one or more trades between two or more marketparticipants, are selectively processed, resulting in an increase in thespeed with which information is processed and transmitted to interestedparties.

The disclosed embodiments may be implemented in association with a datatransaction processing system that processes data items or objects, suchas an exchange computing system. Customer or user devices (e.g., clientcomputers) may submit electronic data transaction request messages,e.g., inbound messages, to the data transaction processing system over adata communication network. The electronic data transaction requestmessages may include, for example, transaction matching parameters, suchas instructions and/or values, for processing the data transactionrequest messages within the data transaction processing system. Theinstructions may be to perform transactions, e.g., buy or sell aquantity of a product at a specified price. Products, e.g., financialinstruments, or order books representing the state of an electronicmarketplace for a product, may be represented as data objects within theexchange computing system. The instructions may also be conditional,e.g., buy or sell a quantity of a product at a given value if a tradefor the product is executed at some other reference value.

The data transaction processing system may include various specificallyconfigured matching processors that match, e.g., automatically,electronic data transaction request messages for the same one of thedata items or objects. The specifically configured matching processorsmay match, or attempt to match, electronic data transaction requestmessages based on multiple transaction matching parameters from thedifferent client computers. The matching may be a primary process thatis performed by the data transaction processing system, followed by asecondary process pipelined to the primary process, i.e., the secondaryprocess may be performed sequentially after the primary process. Asecondary process may be any process that furthers the goals of theexchange computing system, such as to increase liquidity of the marketand/or financial instruments that are offered for trading by theexchange computing system.

Input electronic data transaction request messages may be received fromdifferent client computers over a data communication network, and outputelectronic data transaction result messages may be transmitted to theclient computers and may be indicative of results of the primary and thesecondary processes. The specifically configured matching processors mayadditionally generate information indicative of a state of anenvironment (e.g., the state of the order book) based on the processingof the electronic data transaction request messages, and report thisinformation to data recipient computing systems via outbound messagespublished via one or more data feeds that contain electronic datatransaction result messages. While the disclosed embodiments may bedescribed with respect to electronic data transaction request and resultmessages, it will be appreciated that the disclosed embodiments may beimplemented with respect to other technologies later developed, such asphotonic, e.g., light-based, messages.

Exchange Computing System

A financial instrument trading system, such as a futures exchange, suchas the Chicago Mercantile Exchange Inc. (CME), provides a contractmarket where financial instruments, e.g., futures and options onfutures, are traded using electronic systems. “Futures” is a term usedto designate all contracts for the purchase or sale of financialinstruments or physical commodities for future delivery or cashsettlement on a commodity futures exchange. A futures contract is alegally binding agreement to buy or sell a commodity at a specifiedprice at a predetermined future time. An option contract is the right,but not the obligation, to sell or buy the underlying instrument (inthis case, a futures contract) at a specified price on or before acertain expiration date. An option contract offers an opportunity totake advantage of futures price moves without actually having a futuresposition. The commodity to be delivered in fulfillment of the contract,or alternatively the commodity for which the cash market price shalldetermine the final settlement price of the futures contract, is knownas the contract's underlying reference or “underlier.” The underlying orunderlier for an options contract is the corresponding futures contractthat is purchased or sold upon the exercise of the option.

The terms and conditions of each futures contract are standardized as tothe specification of the contract's underlying reference commodity, thequality of such commodity, quantity, delivery date, and means ofcontract settlement. Cash settlement is a method of settling a futurescontract whereby the parties effect final settlement when the contractexpires by paying/receiving the loss/gain related to the contract incash, rather than by effecting physical sale and purchase of theunderlying reference commodity at a price determined by the futurescontract, price. Options and futures may be based on more generalizedmarket indicators, such as stock indices, interest rates, futurescontracts and other derivatives.

An exchange may provide for a centralized “clearing house” through whichtrades made must be confirmed, matched, and settled each day untiloffset or delivered. The clearing house may be an adjunct to anexchange, and may be an operating division of an exchange, which isresponsible for settling trading accounts, clearing trades, collectingand maintaining performance bond funds, regulating delivery, andreporting trading data. One of the roles of the clearing house is tomitigate credit risk. Clearing is the procedure through which theclearing house becomes buyer to each seller of a futures contract, andseller to each buyer, also referred to as a novation, and assumesresponsibility for protecting buyers and sellers from financial loss dueto breach of contract, by assuring performance on each contract. Aclearing member is a firm qualified to clear trades through the clearinghouse.

An exchange computing system may operate under a central counterpartymodel, where the exchange acts as an intermediary between marketparticipants for the transaction of financial instruments. Inparticular, the exchange computing system novates itself into thetransactions between the market participants, i.e., splits a giventransaction between the parties into two separate transactions where theexchange computing system substitutes itself as the counterparty to eachof the parties for that part of the transaction, sometimes referred toas a novation. In this way, the exchange computing system acts as aguarantor and central counterparty and there is no need for the marketparticipants to disclose their identities to each other, or subjectthemselves to credit or other investigations by a potentialcounterparty. For example, the exchange computing system insulates onemarket participant from the default by another market participant.Market participants need only meet the requirements of the exchangecomputing system. Anonymity among the market participants encourages amore liquid market environment as there are lower barriers toparticipation. The exchange computing system can accordingly offerbenefits such as centralized and anonymous matching and clearing.

A match engine within a financial instrument trading system may comprisea transaction processing system that processes a high volume, e.g.,millions, of messages or orders in one day. The messages are typicallysubmitted from market participant computers. Exchange match enginesystems may be subject to variable messaging loads due to variablemarket messaging activity. Performance of a match engine depends to acertain extent on the magnitude of the messaging load and the workneeded to process that message at any given time. An exchange matchengine may process large numbers of messages during times of high volumemessaging activity. With limited processing capacity, high messagingvolumes may increase the response time or latency experienced by marketparticipants.

Electronic messages such as incoming messages from market participants,i.e., “outright” messages, e.g., trade order messages, etc., are sentfrom client devices associated with market participants, or theirrepresentatives, to an electronic trading or market system.

Electronic Data Transaction Request/Result Messages

As used herein, a financial message, or an electronic message, refersboth to messages communicated by market participants to an electronictrading or market system and vice versa. The messages may becommunicated using packeting or other techniques operable to communicateinformation between systems and system components. Some messages may beassociated with actions to be taken in the electronic trading or marketsystem. In particular, in one embodiment, upon receipt of a request, atoken is allocated and included in a TCP shallow acknowledgmenttransmission sent back to the participant acknowledging receipt of therequest. It should be appreciated that while this shallow acknowledgmentis, in some sense, a response to the request, it does not confirm theprocessing of an order included in the request. The participant, i.e.,their device, then sends back a TCP acknowledgment which acknowledgesreceipt of the shallow acknowledgment and token.

Financial messages communicated to the electronic trading system, alsoreferred to as “inbound” messages, may include associated actions thatcharacterize the messages, such as trader orders, order modifications,order cancellations and the like, as well as other message types.Inbound messages may be sent from client devices associated with marketparticipants, or their representatives, e.g., trade order messages,etc., to an electronic trading or market system. For example, a marketparticipant may submit an electronic message to the electronic tradingsystem that includes an associated specific action to be undertaken bythe electronic trading system, such as entering a new trade order intothe market or modifying an existing order in the market. In oneembodiment, if a participant wishes to modify a previously sent request,e.g., a prior order which has not yet been processed or traded, they maysend a request message comprising a request to modify the prior request.In one exemplary embodiment, the incoming request itself, e.g., theinbound order entry, may be referred to as an iLink message. iLink is abidirectional communications/message protocol/message format implementedby the Chicago Mercantile Exchange Inc.

Financial messages communicated from the electronic trading system,referred to as “outbound” messages, may include messages responsive toinbound messages, such as confirmation messages, or other messages suchas market update messages, quote messages, and the like. Outboundmessages, or electronic data transaction result messages, may bedisseminated via data feeds.

Financial messages may further be categorized as having or reflecting animpact on a market or electronic marketplace, also referred to as an“order book” or “book,” for a traded product, such as a prevailing pricetherefore, number of resting orders at various price levels andquantities thereof, etc., or not having or reflecting an impact on amarket or a subset or portion thereof. In one embodiment, an electronicorder book may be understood to be an electronic collection of theoutstanding or resting orders for a financial instrument.

For example, a request to place a trade may result in a responseindicative of the trade either being matched with, or being rested on anorder book to await, a suitable counter-order. This response may includea message directed solely to the trader who submitted the order toacknowledge receipt of the order and report whether it was matched, andthe extent thereto, or rested. The response may further include amessage to all market participants reporting a change in the order bookdue to the order, or an electronic data transaction result message. Thisresponse may take the form of a report of the specific change to theorder book, e.g., an order for quantity X at price Y was added to thebook (referred to, in one embodiment, as a Market By Order message), ormay simply report the result, e.g., price level Y now has orders for atotal quantity of Z (where Z is the sum of the previous resting quantityplus quantity X of the new order). In some cases, requests may elicit anon-impacting response, such as temporally proximate to the receipt ofthe request, and then cause a separate market-impact reflecting responseat a later time. For example, a stop order, fill or kill order (FOK),also known as an immediate or cancel order, or other conditional requestmay not have an immediate market impacting effect, if at all, until therequisite conditions are met.

An acknowledgement or confirmation of receipt, e.g., a non-marketimpacting communication, may be sent to the trader simply confirmingthat the order was received. Upon the conditions being met and a marketimpacting result thereof occurring, a market-impacting message may betransmitted as described herein both directly back to the submittingmarket participant and to all market participants (in a Market By Price“MBP” e.g., Aggregated By Value (“ABV”) book, or Market By Order “MBO”,e.g., Per Order (“PO”) book format). It should be appreciated thatadditional conditions may be specified, such as a time or price limit,which may cause the order to be dropped or otherwise canceled and thatsuch an event may result in another non-market-impacting communicationinstead. In some implementations, market impacting communications may becommunicated separately from non-market impacting communications, suchas via a separate communications channel or feed.

For additional details and descriptions of different market data feeds,see U.S. Patent Publication No. 2017/0331774, filed on May 16, 2016,entitled “Systems and Methods for Consolidating Multiple Feed Data”,assigned to the assignee of the present application, the entirety ofwhich is incorporated by reference herein and relied upon.

It should be further appreciated that various types of market data feedsmay be provided which reflect different markets or aspects thereof.Market participants may then, for example, subscribe to receive thosefeeds of interest to them. For example, data recipient computing systemsmay choose to receive one or more different feeds. As market impactingcommunications usually tend to be more important to market participantsthan non-impacting communications, this separation may reduce congestionand/or noise among those communications having or reflecting an impacton a market or portion thereof. Furthermore, a particular market datafeed may only communicate information related to the top buy/sell pricesfor a particular product, referred to as “top of book” feed, e.g., onlychanges to the top 10 price levels are communicated. Such limitationsmay be implemented to reduce consumption of bandwidth and messagegeneration resources. In this case, while a request message may beconsidered market-impacting if it affects a price level other than thetop buy/sell prices, it will not result in a message being sent to themarket participants.

Examples of the various types of market data feeds which may be providedby electronic trading systems, such as the CME, in order to providedifferent types or subsets of market information or to provide suchinformation in different formats include Market By Order or Per Order,Market Depth (also known as Market by Price or Aggregated By Value to adesignated depth of the book), e.g., CME offers a 10-deep market byprice feed, Top of Book (a single depth Market by Price feed), andcombinations thereof. There may also be all manner of specialized feedsin terms of the content, i.e., providing, for example, derived data,such as a calculated index.

Market data feeds may be characterized as providing a “view” or“overview” of a given market, an aggregation or a portion thereof orchanges thereto. For example, a market data feed, such as a Market ByPrice (“MBP”) feed, also known as an Aggregated By Value (“ABV”) feed,may convey, with each message, the entire/current state of a market, orportion thereof, for a particular product as a result of one or moremarket impacting events. For example, an MBP message may convey a totalquantity of resting buy/sell orders at a particular price level inresponse to a new order being placed at that price. An MBP message mayconvey a quantity of an instrument which was traded in response to anincoming order being matched with one or more resting orders. MBPmessages may only be generated for events affecting a portion of amarket, e.g., only the top 10 resting buy/sell orders and, thereby, onlyprovide a view of that portion. As used herein, a market impactingrequest may be said to impact the “view” of the market as presented viathe market data feed.

An MBP feed may utilize different message formats for conveyingdifferent types of market impacting events. For example, when a neworder is rested on the order book, an MBP message may reflect thecurrent state of the price level to which the order was added, e.g., thenew aggregate quantity and the new aggregate number of resting orders.As can be seen, such a message conveys no information about theindividual resting orders, including the newly rested order, themselvesto the market participants. Only the submitting market participant, whoreceives a separate private message acknowledging the event, knows thatit was their order that was added to the book. Similarly, when a tradeoccurs, an MBP message may be sent which conveys the price at which theinstrument was traded, the quantity traded and the number ofparticipating orders, but may convey no information as to whoseparticular orders contributed to the trade. MBP feeds may further batchreporting of multiple events, i.e., report the result of multiple marketimpacting events in a single message.

Alternatively, a market data feed, referred to as a Market By Order(“MBO”) feed also known as a Per Order (“PO”) feed, may convey datareflecting a change that occurred to the order book rather than theresult of that change, e.g., that order ABC for quantity X was added toprice level Y or that order ABC and order XYZ traded a quantity X at aprice Y. In this case, the MBO message identifies only the change thatoccurred so a market participant wishing to know the current state ofthe order book must maintain their own copy and apply the changereflected in the message to know the current state. As can be seen,MBO/PO messages may carry much more data than MBP/ABV messages becauseMBO/PO messages reflect information about each order, whereas MBP/ABVmessages contain information about orders affecting some predeterminedvalue levels. Furthermore, because specific orders, but not thesubmitting traders thereof, are identified, other market participantsmay be able to follow that order as it progresses through the market,e.g., as it is modified, canceled, traded, etc.

An ABV book data object may include information about multiple values.The ABV book data object may be arranged and structured so thatinformation about each value is aggregated together. Thus, for a givenvalue V, the ABV book data object may aggregate all the information byvalue, such as for example, the number of orders having a certainposition at value V, the quantity of total orders resting at value V,etc. Thus, the value field may be the key, or may be a unique field,within an ABV book data object. In one embodiment, the value for eachentry within the ABV book data object is different. In one embodiment,information in an ABV book data object is presented in a manner suchthat the value field is the most granular field of information.

A PO book data object may include information about multiple orders. ThePO book data object may be arranged and structured so that informationabout each order is represented. Thus, for a given order O, the PO bookdata object may provide all of the information for order O. Thus, theorder field may be the key, or may be a unique field, within a PO bookdata object. In one embodiment, the order ID for each entry within thePO book data object is different. In one embodiment, information in a PObook data object is presented in a manner such that the order field isthe most granular field of information.

Thus, the PO book data object may include data about unique orders,e.g., all unique resting orders for a product, and the ABV book dataobject may include data about unique values, e.g., up to a predeterminedlevel, e.g., top ten price or value levels, for a product.

It should be appreciated that the number, type and manner of market datafeeds provided by an electronic trading system are implementationdependent and may vary depending upon the types of products traded bythe electronic trading system, customer/trader preferences, bandwidthand data processing limitations, etc. and that all such feeds, nowavailable or later developed, are contemplated herein. MBP/ABV andMBO/PO feeds may refer to categories/variations of market data feeds,distinguished by whether they provide an indication of the current stateof a market resulting from a market impacting event (MBP) or anindication of the change in the current state of a market due to amarket impacting event (MBO).

Messages, whether MBO or MBP, generated responsive to market impactingevents which are caused by a single order, such as a new order, an ordercancellation, an order modification, etc., are fairly simple and compactand easily created and transmitted. However, messages, whether MBO orMBP, generated responsive to market impacting events which are caused bymore than one order, such as a trade, may require the transmission of asignificant amount of data to convey the requisite information to themarket participants. For trades involving a large number of orders,e.g., a buy order for a quantity of 5000 which matches 5000 sell orderseach for a quantity of 1, a significant amount of information may needto be sent, e.g., data indicative of each of the 5000 trades that haveparticipated in the market impacting event.

In one embodiment, an exchange computing system may generate multipleorder book objects, one for each type of view that is published orprovided. For example, the system may generate a PO book object and anABV book object. It should be appreciated that each book object, or viewfor a product or market, may be derived from the Per Order book object,which includes all the orders for a given financial product or market.

An inbound message may include an order that affects the PO book object,the ABV book object, or both. An outbound message may include data fromone or more of the structures within the exchange computing system,e.g., the PO book object queues or the ABV book object queues.

Furthermore, each participating trader needs to receive a notificationthat their particular order has traded. Continuing with the example,this may require sending 5001 individual trade notification messages, oreven 10,000+ messages where each contributing side (buy vs. sell) isseparately reported, in addition to the notification sent to all of themarket participants.

As detailed in U.S. Patent Publication No. 2015/0161727, the entirety ofwhich is incorporated by reference herein and relied upon, it may berecognized that trade notifications sent to all market participants mayinclude redundant information repeated for each participating trade anda structure of an MBP trade notification message may be provided whichresults in a more efficient communication of the occurrence of a trade.The message structure may include a header portion which indicates thetype of transaction which occurred, i.e., a trade, as well as othergeneral information about the event, an instrument portion whichcomprises data about each instrument which was traded as part of thetransaction, and an order portion which comprises data about eachparticipating order. In one embodiment, the header portion may include amessage type, Transaction Time, Match Event Indicator, and Number ofMarket Data Entries (“No. MD Entries”) fields. The instrument portionmay include a market data update action indicator (“MD Update Action”),an indication of the Market Data Entry Type (“MD Entry Type”), anidentifier of the instrument/security involved in the transaction(“Security ID”), a report sequence indicator (“Rpt Seq”), the price atwhich the instrument was traded (“MD Entry PX”), the aggregate quantitytraded at the indicated price (“ConsTradeQty”), the number ofparticipating orders (“NumberOfOrders”), and an identifier of theaggressor side (“Aggressor Side”) fields. The order portion may furtherinclude an identifier of the participating order (“Order ID”), describedin more detail below, and the quantity of the order traded (“MD EntrySize”) fields. It should be appreciated that the particular fieldsincluded in each portion are implementation dependent and that differentfields in addition to, or in lieu of, those listed may be includeddepending upon the implementation. It should be appreciated that theexemplary fields can be compliant with the FIX binary and/or FIX/FASTprotocol for the communication of the financial information.

The instrument portion contains a set of fields, e.g., seven fieldsaccounting for 23 bytes, which are repeated for each participatinginstrument. In complex trades, such as trades involving combinationorders or strategies, e.g., spreads, or implied trades, there may bemultiple instruments being exchanged among the parties. In oneembodiment, the order portion includes only one field, accounting for 4bytes, for each participating order which indicates the quantity of thatorder which was traded. As will be discussed below, the order portionmay further include an identifier of each order, accounting for anadditional 8 bytes, in addition to the quantity thereof traded. Asshould be appreciated, data which would have been repeated for eachparticipating order, is consolidated or otherwise summarized in theheader and instrument portions of the message thereby eliminatingredundant information and, overall, significantly reducing the size ofthe message.

The disclosed embodiments may be applicable to the use of either an MBPmarket data feed and/or an MBO market data feed.

Market Segment Gateway

In one embodiment, the disclosed system may include a Market SegmentGateway (“MSG”) that is the point of ingress/entry and/oregress/departure for all transactions, i.e., the network traffic/packetscontaining the data therefore, specific to a single market at which theorder of receipt of those transactions may be ascribed. An MSG or MarketSegment Gateway may be utilized for the purpose of deterministicoperation of the market. The electronic trading system may includemultiple markets, and because the electronic trading system includes oneMSG for each market/product implemented thereby, the electronic tradingsystem may include multiple MSGs. For more detail on deterministicoperation in a trading system, see U.S. Patent Publication No.2015/0127513 entitled “Transactionally Deterministic High SpeedFinancial Exchange Having Improved, Efficiency, Communication,Customization, Performance, Access, Trading Opportunities, CreditControls, And Fault Tolerance” and filed on Nov. 7, 2013 (“the '513Publication”), the entire disclosure of which is incorporated byreference herein and relied upon.

For example, a participant may send a request for a new transaction,e.g., a request for a new order, to the MSG. The MSG extracts or decodesthe request message and determines the characteristics of the requestmessage.

The MSG may include, or otherwise be coupled with, a buffer, cache,memory, database, content addressable memory, data store or other datastorage mechanism, or combinations thereof, which stores data indicativeof the characteristics of the request message. The request is passed tothe transaction processing system, e.g., the match engine.

An MSG or Market Segment Gateway may be utilized for the purpose ofdeterministic operation of the market. Transactions for a particularmarket may be ultimately received at the electronic trading system viaone or more points of entry, e.g., one or more communicationsinterfaces, at which determinism may be applied, which as described maybe at the point where matching occurs, e.g., at each match engine (wherethere may be multiple match engines, each for a given product/market, ormoved away from the point where matching occurs and closer to the pointwhere the electronic trading system first becomes “aware” of theincoming transaction, such as the point where transaction messages,e.g., orders, ingress the electronic trading system. Generally, theterms “determinism” or “transactional determinism” may refer to theprocessing, or the appearance thereof, of orders in accordance withdefined business rules. Accordingly, as used herein, the point ofdeterminism may be the point at which the electronic trading systemascribes an ordering to incoming transactions/orders relative to otherincoming transactions/orders such that the ordering may be factored intothe subsequent processing, e.g., matching, of those transactions/ordersas will be described.

As described above, as used herein a business transaction may be definedas one or more operations or acts which are undertaken according to oneor more associated business rules (including industry, legal orregulatory requirements or customs) to accomplish a business orcommercial purpose, which may include compliance with industry,regulatory or legal requirements. A business transaction may beimplemented by one or more computer processing and/or databaseoperations/program steps, which themselves may be referred to astransactions. Business transactions, as defined by the associatedbusiness rules, may be characterized as deterministic in that they becharacterized by an interdependency or relationship which affects theirresult, such as a dependency on the order in which they are processed,such as a temporal order, and/or a dependency on real time processing,as defined by business rules, so as to effect the business/commercialpurpose and/or meet participant expectations, referred to herein as“transactional determinism.” Generally, a set of deterministictransactions will provide a particular result when executed in one orderand a different result when executed in a different order. In someapplications, deterministic processing may be preferred/prioritized overreal time processing.

For example, wherein the business rules define a first-in-first-out(“FIFO”) process for matching offers with counter-offers to effect anexchange or trade, when an offer transaction is received to which noprior counter offer transaction has been previously received, it shouldbe matched with the next suitable counter offer transaction receivedrather than a later received counter offer transactions. It will beappreciated that the processing of a given transaction may involvedelaying further processing of that transaction in favor of a laterreceived transaction, such as dependent upon conditions specified by theearlier transaction and/or the defined business rules. It will furtherbe appreciated that, at a minimum, any representation of the currentstate of a business environment, e.g. market, or changes thereto, inwhich the business transactions are transacted should present anaccurate reflection of the actual state or state change in accordancewith the defined business rules, so as to not mislead participants orprovide an unfair advantage. In the disclosed embodiments, the phrase“financial transaction” will refer to a business transaction involvingthe purchase or sale of financial instruments, such as futures contractsor options thereon, spread or other combination contracts and the like,as will be described. As was described above, electronic trading systemsgenerally define their business rules and then must ensure transactionaldeterminism in compliance therewith.

Generally, when the rate of business transaction processing is less thanthe underlying instructions processing capacity of the underlyinggeneral purpose processor, general performance optimizations implementedby the processor or operating system may be hidden or otherwiseimperceptible at the transactional level. That is, the processor is ableto perform these optimizations (e.g. page switches, instruction prefetch, branch mis-predictions, cache miss processing, error/packetrecovery) fast enough so as not to affect the executing businessapplication. However, as the rate and volume of transactions increases,contention for internal processor resources, such as memory bandwidth,also increases. Accordingly, the impact of internal optimizations on theexecuting application may no longer be imperceptible. In amultiprocessor environment, this impact may affect the ability tomaintain application tasks/processes, which are divided among multipleprocessors, in sync which each other which may result in out of orderexecution of one or more transactions.

In the exemplary embodiments, all transactions are ultimately receivedat the electronic trading system via a single point of entry, i.e. asingle communications interface, at which the disclosed embodimentsapply determinism, which as described is moved away from the point wherematching occurs and closer to the point where the electronic tradingsystem first becomes “aware” of the incoming transaction. This mayrequire improving the performance of this communications interface toprocess the influx of transactions without being overwhelmed. In someimplementations, more orders may be submitted by market participants viamore parallel inputs/channels/communications pathways implemented toincrease capacity and/or reduce resource contention. However, for manyof the reasons described above, parallel communication paths complicatedeterministic behavior, e.g. by creating opportunity, such a viaasymmetric delays among communications paths, for later transmitted orarriving transactions to overtake earlier arriving or transmittedtransactions, and may require mechanisms to discriminate among closelyreceived transactions and arbitrate among simultaneously, orsubstantially simultaneously, received transactions, e.g. transactionsreceived at the same time or received within a threshold of timeunresolvable by the system. Accordingly, mechanisms may be implementedto improve and impart deterministic handling of discrimination andarbitration among closely received transactions.

As was described above, to gain and maintain the trust and confidence ofmarket participants and encourage participation, electronic tradingsystems ideally attempt to offer a more efficient, fair and balancedmarket where market prices reflect a true consensus of the value oftraded products among the market participants, and which minimize, ifnot eliminate, surreptitious or overt subversion, influence of, ormanipulation by, any one or more market participants, intentional orotherwise, and unfair or inequitable advantages, with respect to accessto information or opportunities. To accomplish these goals, for example,electronic trading systems should operate in a deterministic, i.e. acausal, predictable, or otherwise expected, manner as understood andexperienced by the market participants, i.e. the customers of theExchange. Electronic trading systems which implement markets which areovertly or covertly inefficient, unfair or inequitable risk not onlylosing the trust, along with the patronage, of market participants, butalso increased regulatory scrutiny as well as potential criminal and/orcivil liability.

Accordingly, as described, the operators of electronic trading systems,alone or in conjunction with, or at the direction of, regulatory orindustry organizations, typically publish or otherwise promulgate rulesor regulations, referred to as business or operating rules, which governthe operation of the system. These rules define how, for example,multiple transactions are processed by the system where thosetransactions have relationships or dependencies there between which mayaffect the result of such processing. Such business rules may include,for example, order allocation rules, i.e. rules which dictate which ofmultiple competing resting orders will be matched with a particularincoming order counter thereto having insufficient quantity to fill allof the suitable resting orders. For example, under a first-in-first-outmethodology, the first order, of the competing resting orders, that wasreceived by the electronic trading system will be matched with theincoming counter-order and filled to the extent possible by theavailable quantity, with any residual quantity of the incoming counterorder then being allocated to the next received suitable competingresting order and so on until the available quantity of the incomingcounter order is exhausted. However, additional or alternativematching/allocation rules may be implemented as well, for example toensure fair and equal access, improve trading opportunities, etc., byallocating, such as proportionally, the available quantity of theincoming counter order among all, or a subset, of the competing restingorders until the available quantity is exhausted.

Once such business rules are established, or modified, marketparticipants will expect, and overseeing regulatory entities mayrequire, that the electronic trading system operate in accordancetherewith. That is, if the Exchange adopts a rule to give first arrivingorders priority over later arriving orders, a market participant whosubmits an earlier arriving order will expect their order to be filledprior to a later arriving order submitted by another market participant.It will be appreciated that these rules, by which operators of anelectronic trading system may choose to operate their system, may varyat the discretion of the operators, subject to regulatory concerns.Generally, the term “transactional determinism” may refer to theprocessing, or the appearance thereof, of orders in accordance with thedefined business rules.

In addition to efficiency, fairness and equity, electronic tradingsystems further provide significant performance improvements allowingfor rapid high volume transaction processing which benefits both theExchange and market participants. Metrics of electronic trading systemperformance include latency and throughput. Latency may be measured asthe response time of the Exchange. This can be measured in a number ofdifferent contexts: the time elapsed from when an order, or ordercancelation, is received to when a confirmation/acknowledgment ofreceipt is transmitted, from when an order is received to when anexecution notification is transmitted, or the time elapsed from when anorder is received to information about that order being disseminated inthe market data feed. Throughput may be measured as the maximum numberof orders or trades per second that the electronic trading system cansupport, i.e. receive and acknowledge, receive and match, etc.

Generally, market participants desire rapid market data updates, lowlatency/high throughput order processing, and prompt confirmations oftheir instructions to allow them to: competitively, frequently andconfidently evaluate, react to, and capitalize upon or, conversely,avoid, discrete, finite, fast moving/changing or ephemeral marketevents; leverage low return transactions via a high volume thereof;and/or otherwise coordinate, or synchronize their trading activitieswith other related concerns or activities, with less uncertainty withrespect to their order status. Higher volume capacity and transactionprocessing performance provides these benefits as well as, withoutdetrimentally affecting that capacity or performance, further improvesmarket access and market liquidity, such as by allowing forparticipation by more market participants, the provision of additionalfinancial products, and/or additional markets therefore, to meet thevarying needs of the market participants, and rapid identification ofadditional explicit and implicit intra- and inter-market tradingopportunities. The Exchange benefits, for example, from the increasedtransaction volume from which revenue is derived, e.g. via transactionfees.

Current electronic trading systems already offer significant performanceadvantages. However, increasing transaction volumes from an increasingnumber of market participants, implementation by some marketparticipants of algorithmic and/or high frequency trading methodologieswhereby high speed computers automatically monitor markets and react,usually in an overwhelming manner, to events, coupled with a continueddemand for ever-decreasing processing latencies and response times, isdriving a need for additional capacity and performance improvements tomaintain performance as experienced by each market participant and avoiddetrimental consequences, such as capacity exhaustion and inequitableaccess. For example, the increasing speed at which market participantsmay evaluate and respond to changes in market data, such as responsiveto a market event, is increasing the rate at which transactions arereceived by the electronic trading system, narrowing the time of receiptgap there between and necessitating a need for a higher degree ofdiscrimination so as to resolve the order in which those transactionsare received, upon which the deterministic operation of the electronictrading system may be based, e.g. for order allocation, etc.Furthermore, the addition, by electronic trading systems, of additionalchannels of communication in an effort to increase capacity andopportunity, along with increased bandwidth of each channel, allows formore transactions to be submitted over multiple parallel paths into thesystem. Accordingly, not only must the electronic trading systemdiscriminate among closely received incoming transactions, but mustfurther arbitrate among transactions received simultaneously, ortemporally so close together as to be considered simultaneouslyreceived, i.e. the difference in their time of receipt being too closeto measure by the implemented discrimination mechanisms, also referredto as “substantially simultaneously”.

In addition to increased capacity and lower latency, the global natureof business has further driven a need for fault tolerance to increaseavailability and reliability of electronic trading systems. Scheduledoutages must be minimized and unscheduled outages must be eliminated.

Furthermore, to implement the Exchange's clearing function, whichmitigates the concerns of market participants relating to performance bycounter parties, protects the interests of the Exchange and otherwiseadequately manages/mitigates risk, risk management systems havingcorresponding operational efficiency and performance are needed so as toprotect the Exchange from loss while minimizing impediments to marketoperations or distractions to market participants with ancillary andunnecessary tasks. In addition, increased transaction volume may furthertranslate into greater exposure for market participants requiringgreater amounts of capital to be posted to cover losses. Accordingly,more accurate and/or tailored risk assessment may be required to ensurethat only the necessary minimum amount of capital is required to beallocated by the market participants to cover potential losses and avoidundue encumbrances on/impediments to the ability of those marketparticipants to conduct their business.

Improved speed and efficiency also increases the speed at which problemsmay occur and propagate, or otherwise be exploited, such as where themarket ceases to operate as intended, i.e. the market no longer reflectsa true consensus of the value of traded products among the marketparticipants. Such problems are typically, but not always, evidenced byextreme market activity such as large changes in price, whether up ordown, over a short period of time or an extreme volume of trades takingplace. In particular, market participants, whether human or electronic,may not always react in a rational manner, such as when presented withimperfect information, when acting in fraudulent or otherwise unethicalmanner, and/or due to faulty training or design. For example, whilecommunications technologies may have improved, inequities still exist inboth access to information and access to opportunities to participate,which may not be due to any violations of legislative, regulatory and/orethical rules, e.g. some traders receive information before othertraders because they can afford faster communications channels, sometraders may be able to place trade orders more quickly than othersbecause they have faster computers. In many cases, irrational and/orexploitive trader behavior may be triggered by a market event, such as achange in price, creating a feedback loop where the initial irrationalreaction may then cause further market events, such as continued pricedrops, triggering further responses and resulting in an extreme changein the price of the traded product in a short period of time. High speedtrading exacerbates the problem as there may be little time fortraders/algorithmic trading systems, or those overseeing them, tocontemplate and temper their reactions before significant losses may beincurred. Furthermore, improved communications among traders facilitatesexploitation of information inequities and propagation of irrationalbehavior in one market to other markets as traders in those othermarkets react to the results of the irrational behavior. Marketprotection systems may therefore be needed to monitor and evaluatetrading activity, detect illegitimate/exploitive activity andappropriately react more quickly to mitigate the spread of problems,again without impeding legitimate market operation.

Electronic Trading

Electronic trading of financial instruments, such as futures contracts,is conducted by market participants sending orders, such as to buy orsell one or more futures contracts, in electronic form to the exchange.These electronically submitted orders to buy and sell are then matched,if possible, by the exchange, i.e., by the exchange's matching engine,to execute a trade. Outstanding (unmatched, wholly unsatisfied/unfilledor partially satisfied/filled) orders are maintained in one or more datastructures or databases referred to as “order books,” such orders beingreferred to as “resting,” and made visible, i.e., their availability fortrading is advertised, to the market participants through electronicnotifications/broadcasts, referred to as market data feeds. An orderbook is typically maintained for each product, e.g., instrument, tradedon the electronic trading system and generally defines or otherwiserepresents the state of the market for that product, i.e., the currentprices at which the market participants are willing buy or sell thatproduct. As such, as used herein, an order book for a product may alsobe referred to as a market for that product.

Upon receipt of an incoming order to trade in a particular financialinstrument, whether for a single-component financial instrument, e.g., asingle futures contract, or for a multiple-component financialinstrument, e.g., a combination contract such as a spread contract, amatch engine, as described herein, will attempt to identify a previouslyreceived but unsatisfied order counter thereto, i.e., for the oppositetransaction (buy or sell) in the same financial instrument at the sameor better price (but not necessarily for the same quantity unless, forexample, either order specifies a condition that it must be entirelyfilled or not at all).

Previously received but unsatisfied orders, i.e., orders which eitherdid not match with a counter order when they were received or theirquantity was only partially satisfied, referred to as a partial fill,are maintained by the electronic trading system in an order bookdatabase/data structure to await the subsequent arrival of matchingorders or the occurrence of other conditions which may cause the orderto be modified or otherwise removed from the order book.

If the match engine identifies one or more suitable previously receivedbut unsatisfied counter orders, they, and the incoming order, arematched to execute a trade there between to at least partially satisfythe quantities of one or both the incoming order or the identifiedorders. If there remains any residual unsatisfied quantity of theidentified one or more orders, those orders are left on the order bookwith their remaining quantity to await a subsequent suitable counterorder, i.e., to rest. If the match engine does not identify a suitablepreviously received but unsatisfied counter order, or the one or moreidentified suitable previously received but unsatisfied counter ordersare for a lesser quantity than the incoming order, the incoming order isplaced on the order book, referred to as “resting”, with original orremaining unsatisfied quantity, to await a subsequently receivedsuitable order counter thereto. The match engine then generates matchevent data reflecting the result of this matching process. Othercomponents of the electronic trading system, as will be described, thengenerate the respective order acknowledgment and market data messagesand transmit those messages to the market participants.

Matching, which is a function typically performed by the exchange, is aprocess, for a given order which specifies a desire to buy or sell aquantity of a particular instrument at a particular price, ofseeking/identifying one or more wholly or partially, with respect toquantity, satisfying counter orders thereto, e.g., a sell counter to anorder to buy, or vice versa, for the same instrument at the same, orsometimes better, price (but not necessarily the same quantity), whichare then paired for execution to complete a trade between the respectivemarket participants (via the exchange) and at least partially satisfythe desired quantity of one or both of the order and/or the counterorder, with any residual unsatisfied quantity left to await anothersuitable counter order, referred to as “resting.” A match event mayoccur, for example, when an aggressing order matches with a restingorder. In one embodiment, two orders match because one order includesinstructions for or specifies buying a quantity of a particularinstrument at a particular price, and the other order includesinstructions for or specifies selling a (different or same) quantity ofthe instrument at a same or better price. It should be appreciated thatperforming an instruction associated with a message may includeattempting to perform the instruction. Whether or not an exchangecomputing system is able to successfully perform an instruction maydepend on the state of the electronic marketplace.

While the disclosed embodiments will be described with respect to aproduct by product or market by market implementation, e.g. implementedfor each market/order book, it will be appreciated that the disclosedembodiments may be implemented so as to apply across markets formultiple products traded on one or more electronic trading systems, suchas by monitoring an aggregate, correlated or other derivation of therelevant indicative parameters as described herein.

While the disclosed embodiments may be discussed in relation to futuresand/or options on futures trading, it should be appreciated that thedisclosed embodiments may be applicable to any equity, fixed incomesecurity, currency, commodity, options or futures trading system ormarket now available or later developed. It may be appreciated that atrading environment, such as a futures exchange as described herein,implements one or more economic markets where rights and obligations maybe traded. As such, a trading environment may be characterized by a needto maintain market integrity, transparency, predictability,fair/equitable access and participant expectations with respect thereto.In addition, it may be appreciated that electronic trading systemsfurther impose additional expectations and demands by marketparticipants as to transaction processing speed, latency, capacity andresponse time, while creating additional complexities relating thereto.Accordingly, as will be described, the disclosed embodiments may furtherinclude functionality to ensure that the expectations of marketparticipants are met, e.g., that transactional integrity and predictablesystem responses are maintained.

Financial instrument trading systems allow traders to submit orders andreceive confirmations, market data, and other information electronicallyvia electronic messages exchanged using a network. Electronic tradingsystems ideally attempt to offer a more efficient, fair and balancedmarket where market prices reflect a true consensus of the value oftraded products among the market participants, where the intentional orunintentional influence of any one market participant is minimized ifnot eliminated, and where unfair or inequitable advantages with respectto information access are minimized if not eliminated.

Electronic marketplaces attempt to achieve these goals by usingelectronic messages to communicate actions and related data of theelectronic marketplace between market participants, clearing firms,clearing houses, and other parties. The messages can be received usingan electronic trading system, wherein an action or transactionassociated with the messages may be executed. For example, the messagemay contain information relating to an order to buy or sell a product ina particular electronic marketplace, and the action associated with themessage may indicate that the order is to be placed in the electronicmarketplace such that other orders which were previously placed maypotentially be matched to the order of the received message. Thus theelectronic marketplace may conduct market activities through electronicsystems.

As may be perceived/experienced by the market participants from outsidethe Exchange or electronic trading system operated thereby, thefollowing sequence describes how, at least in part, information may bepropagated in such a system and how orders may be processed:

(1) An opportunity is created at a matching engine of the Exchange, suchas by placing a recently received but unmatched order on the order bookto rest;

(2) The matching engine creates an update reflecting the opportunity andsends it to a feed engine;

(3) The feed engine multicasts it to all of the market participants toadvertise the opportunity to trade;

(4) The market participants evaluate the opportunity and each, uponcompletion of their evaluation, may or may not choose to respond with anorder responsive to the resting order, i.e. counter to the restingorder;

(5) The Exchange gateway receives any counter orders generated by themarket participants, sends confirmation of receipt back directly to eachsubmitting market participant, and forwards the received orders to thematching engine; and

(6) The matching engine evaluates the received orders and matches thefirst arriving order against the resting opportunity and a trade isexecuted.

Clearing House

The clearing house of an exchange clears, settles and guarantees matchedtransactions in contracts occurring through the facilities of theexchange. In addition, the clearing house establishes and monitorsfinancial requirements for clearing members and conveys certain clearingprivileges in conjunction with the relevant exchange markets.

The clearing house establishes clearing level performance bonds(margins) for all products of the exchange and establishes minimumperformance bond requirements for customers of such products. Aperformance bond, also referred to as a margin requirement, correspondswith the funds that must be deposited by a customer with his or herbroker, by a broker with a clearing member or by a clearing member withthe clearing house, for the purpose of insuring the broker or clearinghouse against loss on open futures or options contracts. This is not apart payment on a purchase. The performance bond helps to ensure thefinancial integrity of brokers, clearing members and the exchange as awhole. The performance bond refers to the minimum dollar depositrequired by the clearing house from clearing members in accordance withtheir positions. Maintenance, or maintenance margin, refers to a sum,usually smaller than the initial performance bond, which must remain ondeposit in the customer's account for any position at all times. Theinitial margin is the total amount of margin per contract required bythe broker when a futures position is opened. A drop in funds below thislevel requires a deposit back to the initial margin levels, i.e., aperformance bond call. If a customer's equity in any futures positiondrops to or under the maintenance level because of adverse price action,the broker must issue a performance bond/margin call to restore thecustomer's equity. A performance bond call, also referred to as a margincall, is a demand for additional funds to bring the customer's accountback up to the initial performance bond level whenever adverse pricemovements cause the account to go below the maintenance.

The exchange derives its financial stability in large part by removingdebt obligations among market participants as they occur. This isaccomplished by determining a settlement price at the close of themarket each day for each contract and marking all open positions to thatprice, referred to as “mark to market.” Every contract is debited orcredited based on that trading session's gains or losses. As prices movefor or against a position, funds flow into and out of the tradingaccount. In the case of the CME, each business day by 6:40 a.m. Chicagotime, based on the mark-to-the-market of all open positions to theprevious trading day's settlement price, the clearing house pays to orcollects cash from each clearing member. This cash flow, known assettlement variation, is performed by CME's settlement banks based oninstructions issued by the clearing house. All payments to andcollections from clearing members are made in “same-day” funds. Inaddition to the 6:40 a.m. settlement, a daily intra-day mark-to-themarket of all open positions, including trades executed during theovernight GLOBEX®, the CME's electronic trading systems, trading sessionand the current day's trades matched before 11:15 a.m., is performedusing current prices. The resulting cash payments are made intra-day forsame day value. In times of extreme price volatility, the clearing househas the authority to perform additional intra-day mark-to-the-marketcalculations on open positions and to call for immediate payment ofsettlement variation. CME's mark-to-the-market settlement system differsfrom the settlement systems implemented by many other financial markets,including the interbank, Treasury securities, over-the-counter foreignexchange and debt, options, and equities markets, where participantsregularly assume credit exposure to each other. In those markets, thefailure of one participant can have a ripple effect on the solvency ofthe other participants. Conversely, CME's mark-to-the-market system doesnot allow losses to accumulate over time or allow a market participantthe opportunity to defer losses associated with market positions.

While the disclosed embodiments may be described in reference to theCME, it should be appreciated that these embodiments are applicable toany exchange. Such other exchanges may include a clearing house that,like the CME clearing house, clears, settles and guarantees all matchedtransactions in contracts of the exchange occurring through itsfacilities. In addition, such clearing houses establish and monitorfinancial requirements for clearing members and convey certain clearingprivileges in conjunction with the relevant exchange markets.

The disclosed embodiments are also not limited to uses by a clearinghouse or exchange for purposes of enforcing a performance bond or marginrequirement. For example, a market participant may use the disclosedembodiments in a simulation or other analysis of a portfolio. In suchcases, the settlement price may be useful as an indication of a value atrisk and/or cash flow obligation rather than a performance bond. Thedisclosed embodiments may also be used by market participants or otherentities to forecast or predict the effects of a prospective position onthe margin requirement of the market participant.

Example Users

Generally, a market may involve market makers, such as marketparticipants who consistently provide bids and/or offers at specificprices in a manner typically conducive to balancing risk, and markettakers who may be willing to execute transactions at prevailing bids oroffers may be characterized by more aggressive actions so as to maintainrisk and/or exposure as a speculative investment strategy. From analternate perspective, a market maker may be considered a marketparticipant who places an order to sell at a price at which there is nopreviously or concurrently provided counter order. Similarly, a markettaker may be considered a market participant who places an order to buyat a price at which there is a previously or concurrently providedcounter order. A balanced and efficient market may involve both marketmakers and market takers, coexisting in a mutually beneficial basis. Themutual existence, when functioning properly, may facilitate liquidity inthe market such that a market may exist with “tight” bid-ask spreads(e.g., small difference between bid and ask prices) and a “deep” volumefrom many currently provided orders such that large quantity orders maybe executed without driving prices significantly higher or lower.

As such, both market participant types are useful in generatingliquidity in a market, but specific characteristics of market activitytaken by market participants may provide an indication of a particularmarket participant's effect on market liquidity. For example, a MarketQuality Index (“MQI”) of an order may be determined using thecharacteristics. An MQI may be considered a value indicating alikelihood that a particular order will improve or facilitate liquidityin a market. That is, the value may indicate a likelihood that the orderwill increase a probability that subsequent requests and transactionfrom other market participants will be satisfied. As such, an MQI may bedetermined based on a proximity of the entered price of an order to amidpoint of a current bid-ask price spread, a size of the entered order,a volume or quantity of previously filled orders of the marketparticipant associated with the order, and/or a frequency ofmodifications to previous orders of the market participant associatedwith the order. In this way, an electronic trading system may functionto assess and/or assign an MQI to received electronic messages toestablish messages that have a higher value to the system, and thus thesystem may use computing resources more efficiently by expendingresources to match orders of the higher value messages prior toexpending resources of lower value messages.

While an MQI may be applied to any or all market participants, such anindex may also be applied only to a subset thereof, such as large marketparticipants, or market participants whose market activity as measuredin terms of average daily message traffic over a limited historical timeperiod exceeds a specified number. For example, a market participantgenerating more than 500, 1,000, or even 10,000 market messages per daymay be considered a large market participant.

An exchange provides one or more markets for the purchase and sale ofvarious types of products including financial instruments such asstocks, bonds, futures contracts, options, currency, cash, and othersimilar instruments. Agricultural products and commodities are alsoexamples of products traded on such exchanges. A futures contract is aproduct that is a contract for the future delivery of another financialinstrument such as a quantity of grains, metals, oils, bonds, currency,or cash. Generally, each exchange establishes a specification for eachmarket provided thereby that defines at least the product traded in themarket, minimum quantities that must be traded, and minimum changes inprice (e.g., tick size). For some types of products (e.g., futures oroptions), the specification further defines a quantity of the underlyingproduct represented by one unit (or lot) of the product, and deliveryand expiration dates. As will be described, the exchange may furtherdefine the matching algorithm, or rules, by which incoming orders willbe matched/allocated to resting orders.

Matching and Transaction Processing

Market participants, e.g., traders, use software to send orders ormessages to the trading platform. The order identifies the product, thequantity of the product the trader wishes to trade, a price at which thetrader wishes to trade the product, and a direction of the order (i.e.,whether the order is a bid, i.e., an offer to buy, or an ask, i.e., anoffer to sell). It will be appreciated that there may be other ordertypes or messages that traders can send including requests to modify orcancel a previously submitted order.

The exchange computer system monitors incoming orders received therebyand attempts to identify, i.e., match or allocate, as described herein,one or more previously received, but not yet matched, orders, i.e.,limit orders to buy or sell a given quantity at a given price, referredto as “resting” orders, stored in an order book database, wherein eachidentified order is contra to the incoming order and has a favorableprice relative to the incoming order. An incoming order may be an“aggressor” order, i.e., a market order to sell a given quantity atwhatever may be the current resting bid order price(s) or a market orderto buy a given quantity at whatever may be the current resting ask orderprice(s). An incoming order may be a “market making” order, i.e., amarket order to buy or sell at a price for which there are currently noresting orders. In particular, if the incoming order is a bid, i.e., anoffer to buy, then the identified order(s) will be an ask, i.e., anoffer to sell, at a price that is identical to or higher than the bidprice. Similarly, if the incoming order is an ask, i.e., an offer tosell, the identified order(s) will be a bid, i.e., an offer to buy, at aprice that is identical to or lower than the offer price.

An exchange computing system may receive conditional orders or messagesfor a data object, where the order may include two prices or values: areference value and a stop value. A conditional order may be configuredso that when a product represented by the data object trades at thereference price, the stop order is activated at the stop value. Forexample, if the exchange computing system's order management moduleincludes a stop order with a stop price of 5 and a limit price of 1 fora product, and a trade at 5 (i.e., the stop price of the stop order)occurs, then the exchange computing system attempts to trade at 1 (i.e.,the limit price of the stop order). In other words, a stop order is aconditional order to trade (or execute) at the limit price that istriggered (or elected) when a trade at the stop price occurs.

Stop orders also rest on, or are maintained in, an order book to monitorfor a trade at the stop price, which triggers an attempted trade at thelimit price. In some embodiments, a triggered limit price for a stoporder may be treated as an incoming order.

Upon identification (matching) of a contra order(s), a minimum of thequantities associated with the identified order and the incoming orderis matched and that quantity of each of the identified and incomingorders become two halves of a matched trade that is sent to a clearinghouse. The exchange computer system considers each identified order inthis manner until either all of the identified orders have beenconsidered or all of the quantity associated with the incoming order hasbeen matched, i.e., the order has been filled. If any quantity of theincoming order remains, an entry may be created in the order bookdatabase and information regarding the incoming order is recordedtherein, i.e., a resting order is placed on the order book for theremaining quantity to await a subsequent incoming order counter thereto.

It should be appreciated that in electronic trading systems implementedvia an exchange computing system, a trade price (or match value) maydiffer from (i.e., be better for the submitter, e.g., lower than asubmitted buy price or higher than a submitted sell price) the limitprice that is submitted, e.g., a price included in an incoming message,or a triggered limit price from a stop order.

As used herein, “better” than a reference value means lower than thereference value if the transaction is a purchase (or acquire)transaction, and higher than the reference value if the transaction is asell transaction. Said another way, for purchase (or acquire)transactions, lower values are better, and for sell (or relinquish)transactions, higher values are better.

Traders access the markets on a trading platform using trading softwarethat receives and displays at least a portion of the order book for amarket, i.e., at least a portion of the currently resting orders,enables a trader to provide parameters for an order for the producttraded in the market, and transmits the order to the exchange computersystem. The trading software typically includes a graphical userinterface to display at least a price and quantity of some of theentries in the order book associated with the market. The number ofentries of the order book displayed is generally preconfigured by thetrading software, limited by the exchange computer system, or customizedby the user. Some graphical user interfaces display order books ofmultiple markets of one or more trading platforms. The trader may be anindividual who trades on his/her behalf, a broker trading on behalf ofanother person or entity, a group, or an entity. Furthermore, the tradermay be a system that automatically generates and submits orders.

If the exchange computer system identifies that an incoming market ordermay be filled by a combination of multiple resting orders, e.g., theresting order at the best price only partially fills the incoming order,the exchange computer system may allocate the remaining quantity of theincoming, i.e., that which was not filled by the resting order at thebest price, among such identified orders in accordance withprioritization and allocation rules/algorithms, referred to as“allocation algorithms” or “matching algorithms,” as, for example, maybe defined in the specification of the particular financial product ordefined by the exchange for multiple financial products. Similarly, ifthe exchange computer system identifies multiple orders contra to theincoming limit order and that have an identical price which is favorableto the price of the incoming order, i.e., the price is equal to orbetter, e.g., lower if the incoming order is a buy (or instruction topurchase, or instruction to acquire) or higher if the incoming order isa sell (or instruction to relinquish), than the price of the incomingorder, the exchange computer system may allocate the quantity of theincoming order among such identified orders in accordance with thematching algorithms as, for example, may be defined in the specificationof the particular financial product or defined by the exchange formultiple financial products.

An exchange responds to inputs, such as trader orders, cancellation,etc., in a manner as expected by the market participants, such as basedon market data, e.g., prices, available counter-orders, etc., to providean expected level of certainty that transactions will occur in aconsistent and predictable manner and without unknown or unascertainablerisks. Accordingly, the method by which incoming orders are matched withresting orders must be defined so that market participants have anexpectation of what the result will be when they place an order or haveresting orders and an incoming order is received, even if the expectedresult is, in fact, at least partially unpredictable due to somecomponent of the process being random or arbitrary or due to marketparticipants having imperfect or less than all information, e.g.,unknown position of an order in an order book. Typically, the exchangedefines the matching/allocation algorithm that will be used for aparticular financial product, with or without input from the marketparticipants. Once defined for a particular product, thematching/allocation algorithm is typically not altered, except inlimited circumstance, such as to correct errors or improve operation, soas not to disrupt trader expectations. It will be appreciated thatdifferent products offered by a particular exchange may use differentmatching algorithms.

For example, a first-in/first-out (FIFO) matching algorithm, alsoreferred to as a “Price Time” algorithm, considers each identified ordersequentially in accordance with when the identified order was received.The quantity of the incoming order is matched to the quantity of theidentified order at the best price received earliest, then quantities ofthe next earliest best price orders, and so on until the quantity of theincoming order is exhausted. Some product specifications define the useof a pro-rata matching algorithm, wherein a quantity of an incomingorder is allocated to each of plurality of identified ordersproportionally. Some exchange computer systems provide a priority tocertain standing orders in particular markets. An example of such anorder is the first order that improves a price (i.e., improves themarket) for the product during a trading session. To be given priority,the trading platform may require that the quantity associated with theorder is at least a minimum quantity. Further, some exchange computersystems cap the quantity of an incoming order that is allocated to astanding order on the basis of a priority for certain markets. Inaddition, some exchange computer systems may give a preference to orderssubmitted by a trader who is designated as a market maker for theproduct. Other exchange computer systems may use other criteria todetermine whether orders submitted by a particular trader are given apreference. Typically, when the exchange computer system allocates aquantity of an incoming order to a plurality of identified orders at thesame price, the trading host allocates a quantity of the incoming orderto any orders that have been given priority. The exchange computersystem thereafter allocates any remaining quantity of the incoming orderto orders submitted by traders designated to have a preference, and thenallocates any still remaining quantity of the incoming order using theFIFO or pro-rata algorithms. Pro-rata algorithms used in some marketsmay require that an allocation provided to a particular order inaccordance with the pro-rata algorithm must meet at least a minimumallocation quantity. Any orders that do not meet or exceed the minimumallocation quantity are allocated to on a FIFO basis after the pro-rataallocation (if any quantity of the incoming order remains). Moreinformation regarding order allocation may be found in U.S. Pat. No.7,853,499, the entirety of which is incorporated by reference herein andrelied upon.

Other examples of matching algorithms which may be defined forallocation of orders of a particular financial product include: PriceExplicit Time; Order Level Pro Rata; Order Level Priority Pro Rata;Preference Price Explicit Time; Preference Order Level Pro Rata;Preference Order Level Priority Pro Rata; Threshold Pro-Rata; PriorityThreshold Pro-Rata; Preference Threshold Pro-Rata; Priority PreferenceThreshold Pro-Rata; and Split Price-Time Pro-Rata, which are describedin U.S. patent application Ser. No. 13/534,499, filed on Jun. 27, 2012,entitled “Multiple Trade Matching Algorithms,” published as U.S. PatentApplication Publication No. 2014/0006243 A1, the entirety of which isincorporated by reference herein and relied upon.

With respect to incoming orders, some traders, such as automated and/oralgorithmic traders, attempt to respond to market events, such as tocapitalize upon a mispriced resting order or other market inefficiency,as quickly as possible. This may result in penalizing the trader whomakes an errant trade, or whose underlying trading motivations havechanged, and who cannot otherwise modify or cancel their order fasterthan other traders can submit trades there against. It may consideredthat an electronic trading system that rewards the trader who submitstheir order first creates an incentive to either invest substantialcapital in faster trading systems, participate in the marketsubstantially to capitalize on opportunities (aggressor side/lower risktrading) as opposed to creating new opportunities (market making/higherrisk trading), modify existing systems to streamline business logic atthe cost of trade quality, or reduce one's activities and exposure inthe market. The result may be a lesser quality market and/or reducedtransaction volume, and corresponding thereto, reduced fees to theexchange.

With respect to resting orders, allocation/matching suitable restingorders to match against an incoming order can be performed, as describedherein, in many different ways. Generally, it will be appreciated thatallocation/matching algorithms are only needed when the incoming orderquantity is less than the total quantity of the suitable resting ordersas, only in this situation, is it necessary to decide which restingorder(s) will not be fully satisfied, which trader(s) will not get theirorders filled. It can be seen from the above descriptions of thematching/allocation algorithms, that they fall generally into threecategories: time priority/first-in-first-out (“FIFO”), pro rata, or ahybrid of FIFO and pro rata.

FIFO generally rewards the first trader to place an order at aparticular price and maintains this reward indefinitely. So if a traderis the first to place an order at price X, no matter how long that orderrests and no matter how many orders may follow at the same price, assoon as a suitable incoming order is received, that first trader will bematched first. This “first mover” system may commit other traders topositions in the queue after the first move traders. Furthermore, whileit may be beneficial to give priority to a trader who is first to placean order at a given price because that trader is, in effect, taking arisk, the longer that the trader's order rests, the less beneficial itmay be. For instance, it could deter other traders from adding liquidityto the marketplace at that price because they know the first mover (andpotentially others) already occupies the front of the queue.

With a pro rata allocation, incoming orders are effectively split amongsuitable resting orders. This provides a sense of fairness in thateveryone may get some of their order filled. However, a trader who tooka risk by being first to place an order (a “market turning” order) at aprice may end up having to share an incoming order with a much latersubmitted order. Furthermore, as a pro rata allocation distributes theincoming order according to a proportion based on the resting orderquantities, traders may place orders for large quantities, which theyare willing to trade but may not necessarily want to trade, in order toincrease the proportion of an incoming order that they will receive.This results in an escalation of quantities on the order book andexposes a trader to a risk that someone may trade against one of theseorders and subject the trader to a larger trade than they intended. Inthe typical case, once an incoming order is allocated against theselarge resting orders, the traders subsequently cancel the remainingresting quantity which may frustrate other traders. Accordingly, as FIFOand pro rata both have benefits and problems, exchanges may try to usehybrid allocation/matching algorithms which attempt to balance thesebenefits and problems by combining FIFO and pro rata in some manner.However, hybrid systems define conditions or fixed rules to determinewhen FIFO should be used and when pro rata should be used. For example,a fixed percentage of an incoming order may be allocated using a FIFOmechanism with the remainder being allocated pro rata.

Spread Instruments

Traders trading on an exchange including, for example, exchange computersystem 100, often desire to trade multiple financial instruments incombination. Each component of the combination may be called a leg.Traders can submit orders for individual legs or in some cases cansubmit a single order for multiple financial instruments in anexchange-defined combination. Such orders may be called a strategyorder, a spread order, or a variety of other names.

A spread instrument may involve the simultaneous purchase of onesecurity and sale of a related security, called legs, as a unit. Thelegs of a spread instrument may be options or futures contracts, orcombinations of the two. Trades in spread instruments are executed toyield an overall net position whose value, called the spread, depends onthe difference between the prices of the legs. Spread instruments may betraded in an attempt to profit from the widening or narrowing of thespread, rather than from movement in the prices of the legs directly.Spread instruments are either “bought” or “sold” depending on whetherthe trade will profit from the widening or narrowing of the spread,respectively. An exchange often supports trading of common spreads as aunit rather than as individual legs, thus ensuring simultaneousexecution of the two legs, eliminating the execution risk of one legexecuting but the other failing.

One example of a spread instrument is a calendar spread instrument. Thelegs of a calendar spread instrument differ in delivery date of theunderlier. The leg with the earlier occurring delivery date is oftenreferred to as the lead month contract. A leg with a later occurringdelivery date is often referred to as a deferred month contract. Anotherexample of a spread instrument is a butterfly spread instrument, whichincludes three legs having different delivery dates. The delivery datesof the legs may be equidistant to each other. The counterparty ordersthat are matched against such a combination order may be individual,“outright” orders or may be part of other combination orders.

In other words, an exchange may receive, and hold or let rest on thebooks, outright orders for individual contracts as well as outrightorders for spreads associated with the individual contracts. An outrightorder (for either a contract or for a spread) may include an outrightbid or an outright offer, although some outright orders may bundle manybids or offers into one message (often called a mass quote).

A spread is an order for the price difference between two contracts.This results in the trader holding a long and a short position in two ormore related futures or options on futures contracts, with the objectiveof profiting from a change in the price relationship. A typical spreadproduct includes multiple legs, each of which may include one or moreunderlying financial instruments. A butterfly spread product, forexample, may include three legs. The first leg may consist of buying afirst contract. The second leg may consist of selling two of a secondcontract. The third leg may consist of buying a third contract. Theprice of a butterfly spread product may be calculated as:

Butterfly=Leg1−2×Leg2+Leg3  (equation 1)

In the above equation, Leg1 equals the price of the first contract, Leg2equals the price of the second contract and Leg3 equals the price of thethird contract. Thus, a butterfly spread could be assembled from twointer-delivery spreads in opposite directions with the center deliverymonth common to both spreads.

A calendar spread, also called an intra-commodity spread, for futures isan order for the simultaneous purchase and sale of the same futurescontract in different contract months (i.e., buying a September CME S&P500® futures contract and selling a December CME S&P 500 futurescontract).

A crush spread is an order, usually in the soybean futures market, forthe simultaneous purchase of soybean futures and the sale of soybeanmeal and soybean oil futures to establish a processing margin. A crackspread is an order for a specific spread trade involving simultaneouslybuying and selling contracts in crude oil and one or more derivativeproducts, typically gasoline and heating oil. Oil refineries may trade acrack spread to hedge the price risk of their operations, whilespeculators attempt to profit from a change in the oil/gasoline pricedifferential.

A straddle is an order for the purchase or sale of an equal number ofputs and calls, with the same strike price and expiration dates. A longstraddle is a straddle in which a long position is taken in both a putand a call option. A short straddle is a straddle in which a shortposition is taken in both a put and a call option. A strangle is anorder for the purchase of a put and a call, in which the options havethe same expiration and the put strike is lower than the call strike,called a long strangle. A strangle may also be the sale of a put and acall, in which the options have the same expiration and the put strikeis lower than the call strike, called a short strangle. A pack is anorder for the simultaneous purchase or sale of an equally weighted,consecutive series of four futures contracts, quoted on an average netchange basis from the previous day's settlement price. Packs provide areadily available, widely accepted method for executing multiple futurescontracts with a single transaction. A bundle is an order for thesimultaneous sale or purchase of one each of a series of consecutivefutures contracts. Bundles provide a readily available, widely acceptedmethod for executing multiple futures contracts with a singletransaction.

Implication

Thus an exchange may match outright orders, such as individual contractsor spread orders (which as discussed herein could include multipleindividual contracts). The exchange may also imply orders from outrightorders. For example, exchange computer system 100 may derive, identifyand/or advertise, publish, display or otherwise make available fortrading orders based on outright orders.

As was described above, the financial instruments which are the subjectof the orders to trade, may include one or more component financialinstruments. While each financial instrument may have its own orderbook, i.e. market, in which it may be traded, in the case of a financialinstrument having more than one component financial instrument, thosecomponent financial instruments may further have their own order booksin which they may be traded. Accordingly, when an order for a financialinstrument is received, it may be matched against a suitable counterorder in its own order book or, possibly, against a combination ofsuitable counter orders in the order books the component financialinstruments thereof, or which share a common component financialinstrument. For example, an order for a spread contract comprisingcomponent financial instruments A and B may be matched against anothersuitable order for that spread contract. However, it may also be matchedagainst suitable separate counter orders for the A and for the Bcomponent financial instruments found in the order books therefore.Similarly, if an order for the A contract is received and suitable matchcannot be found in the A order book, it may be possible to match orderfor A against a combination of a suitable counter order for a spreadcontract comprising the A and B component financial instruments and asuitable counter order for the B component financial instrument. This isreferred to as “implication” where a given order for a financialinstrument may be matched via a combination of suitable counter ordersfor financial instruments which share common, or otherwiseinterdependent, component financial instruments. Implication increasesthe liquidity of the market by providing additional opportunities fororders to be traded. Increasing the number of transactions may furtherincrease the number of transaction fees collected by the electronictrading system.

The order for a particular financial instrument actually received from amarket participant, whether it comprises one or more component financialinstruments, is referred to as a “real” or “outright” order, or simplyas an outright. The one or more orders which must be synthesized andsubmitted into order books other than the order book for the outrightorder to create matches therein, are referred to as “implied” orders.

Upon receipt of an incoming order, the identification or derivation ofsuitable implied orders which would allow at least a partial trade ofthe incoming outright order to be executed is referred to as“implication” or “implied matching”, the identified orders beingreferred to as an “implied match.” Depending on the number of componentfinancial instruments involved, and whether those component financialinstruments further comprise component financial instruments of theirown, there may be numerous different implied matches identified whichwould allow the incoming order to be at least partially matched andmechanisms may be provided to arbitrate, e.g., automatically, amongthem, such as by picking the implied match comprising the least numberof component financial instruments or the least number of synthesizedorders.

Upon receipt of an incoming order, or thereafter, a combination of oneor more suitable/hypothetical counter orders which have not actuallybeen received but if they were received, would allow at least a partialtrade of the incoming order to be executed, may be, e.g., automatically,identified or derived and referred to as an “implied opportunity.” Aswith implied matches, there may be numerous implied opportunitiesidentified for a given incoming order. Implied opportunities areadvertised to the market participants, such as via suitable syntheticorders, e.g. counter to the desired order, being placed on therespective order books to rest (or give the appearance that there is anorder resting) and presented via the market data feed, electronicallycommunicated to the market participants, to appear available to trade inorder to solicit the desired orders from the market participants.Depending on the number of component financial instruments involved, andwhether those component financial instruments further comprise componentfinancial instruments of their own, there may be numerous impliedopportunities, the submission of a counter order in response thereto,that would allow the incoming order to be at least partially matched.

Implied opportunities, e.g. the advertised synthetic orders, mayfrequently have better prices than the corresponding real orders in thesame contract. This can occur when two or more traders incrementallyimprove their order prices in the hope of attracting a trade, sincecombining the small improvements from two or more real orders can resultin a big improvement in their combination. In general, advertisingimplied opportunities at better prices will encourage traders to enterthe opposing orders to trade with them. The more implied opportunitiesthat the match engine of an electronic trading system cancalculate/derive, the greater this encouragement will be and the morethe exchange will benefit from increased transaction volume. However,identifying implied opportunities may be computationally intensive. Oneresponse message may trigger the calculations of hundreds or thousandsof calculations to determine implied opportunities, which are thenpublished, e.g., as implied messages, via market data feeds. In a highperformance trading system where low transaction latency is important,it may be important to identify and advertise implied opportunitiesquickly so as to improve or maintain market participant interest and/ormarket liquidity.

For example, two different outright orders may be resting on the books,or be available to trade or match. The orders may be resting becausethere are no outright orders that match the resting orders. Thus, eachof the orders may wait or rest on the books until an appropriateoutright counteroffer comes into the exchange, or is placed by a user ofthe exchange. The orders may be for two different contracts that onlydiffer in delivery dates. It should be appreciated that such orderscould be represented as a calendar spread order. Instead of waiting fortwo appropriate outright orders to be received that would match the twoexisting or resting orders, the exchange computer system may identify ahypothetical spread order that, if entered into the system as a tradablespread order, would allow the exchange computer system to match the twooutright orders. The exchange may thus advertise or make available aspread order to users of the exchange system that, if matched with atradable spread order, would allow the exchange to also match the tworesting orders. Thus, the exchange computing system may be configured todetect that the two resting orders may be combined into an order in thespread instrument and accordingly creates an implied order.

In other words, the exchange may imply the counteroffer order by usingmultiple orders to create the counteroffer order. Examples of spreadsinclude implied IN, implied OUT, 2nd- or multiple-generation, crackspreads, straddle, strangle, butterfly, and pack spreads. Implied INspread orders are derived from existing outright orders in individuallegs. Implied OUT outright orders are derived from a combination of anexisting spread order and an existing outright order in one of theindividual underlying legs. Implied orders can fill in gaps in themarket and allow spreads and outright futures traders to trade in aproduct where there would otherwise have been little or no availablebids and asks.

For example, implied IN spreads may be created from existing outrightorders in individual contracts where an outright order in a spread canbe matched with other outright orders in the spread or with acombination of orders in the legs of the spread. An implied OUT spreadmay be created from the combination of an existing outright order in aspread and an existing outright order in one of the individualunderlying leg. An implied IN or implied OUT spread may be created whenan electronic matching system simultaneously works synthetic spreadorders in spread markets and synthetic orders in the individual legmarkets without the risk to the trader/broker of being double filled orfilled on one leg and not on the other leg.

By linking the spread and outright markets, implied spread tradingincreases market liquidity. For example, a buy in one contract month andan offer in another contract month in the same futures contract cancreate an implied market in the corresponding calendar spread. Anexchange may match an order for a spread product with another order forthe spread product. Some exchanges attempt to match orders for spreadproducts with multiple orders for legs of the spread products. With suchsystems, every spread product contract is broken down into a collectionof legs and an attempt is made to match orders for the legs.

Implied orders, unlike real orders, are generated by electronic tradingsystems. In other words, implied orders are computer generated ordersderived from real orders. The system creates the “derived” or “implied”order and provides the implied order as a market that may be tradedagainst. If a trader trades against this implied order, then the realorders that combined to create the implied order and the resultingmarket are executed as matched trades. Implied orders generally increaseoverall market liquidity. The creation of implied orders increases thenumber of tradable items, which has the potential of attractingadditional traders. Exchanges benefit from increased transaction volume.Transaction volume may also increase as the number of matched tradeitems increases.

Examples of implied spread trading include those disclosed in U.S.Patent Publication No. 2005/0203826, entitled “Implied Spread TradingSystem,” the entire disclosure of which is incorporated by referenceherein and relied upon. Examples of implied markets include thosedisclosed in U.S. Pat. No. 7,039,610, entitled “Implied Market TradingSystem,” the entire disclosure of which is incorporated by referenceherein and relied upon.

In some cases, the outright market for the deferred month or otherconstituent contract may not be sufficiently active to provide marketdata (e.g., bid-offer data) and/or trade data. Spread instrumentsinvolving such contracts may nonetheless be made available by theexchange. The market data from the spread instruments may then be usedto determine a settlement price for the constituent contract. Thesettlement price may be determined, for example, through a boundaryconstraint-based technique based on the market data (e.g., bid-offerdata) for the spread instrument, as described in U.S. Patent PublicationNo. 2015/0073962 entitled “Boundary Constraint-Based Settlement inSpread Markets”, the entire disclosure of which is incorporated byreference herein and relied upon. Settlement price determinationtechniques may be implemented to cover calendar month spread instrumentshaving different deferred month contracts.

Referring again to data transaction processing systems, a system maydepend on certain rules, logic, and inter-related objects and data. Intechnical and computing environments, a system may calculate values formultiple objects subject to rules, e.g., business or environment logic,associated with the objects. Certain object types may also depend onother object types. For example, a computing environment may includemultiple objects of different types, e.g., base objects and compositeobjects. A composite object as used herein is an object whose valuedepends on, is related to, or is influenced by, the values of otherobjects, such as base objects or other composite objects. For example, acomposite object may involve transactions between multiple, e.g., two,base objects. Or, a composite object may define a relationship betweenother objects. Thus, composite objects depend on the values of othersystem objects. In one embodiment, a composite object involves ordefines a transaction or relationship between at least two otherobjects. For example, a composite object involves or defines atransaction or relationship between two base objects. A base object mayrepresent an outright order associated with a financial instrument, anda composite object may represent a spread order associated with afinancial instrument.

Computing Environment

The embodiments may be described in terms of a distributed computingsystem. The particular examples identify a specific set of componentsuseful in a futures and options exchange. However, many of thecomponents and inventive features are readily adapted to otherelectronic trading environments. The specific examples described hereinmay teach specific protocols and/or interfaces, although it should beunderstood that the principles involved may be extended to, or appliedin, other protocols and interfaces.

It should be appreciated that the plurality of entities utilizing orinvolved with the disclosed embodiments, e.g., the market participants,may be referred to by other nomenclature reflecting the role that theparticular entity is performing with respect to the disclosedembodiments and that a given entity may perform more than one roledepending upon the implementation and the nature of the particulartransaction being undertaken, as well as the entity's contractual and/orlegal relationship with another market participant and/or the exchange.

An exemplary trading network environment for implementing tradingsystems and methods is shown in FIG. 1. An exchange computer system 100receives messages that include orders and transmits market data relatedto orders and trades to users, such as via wide area network 162 and/orlocal area network 160 and computer devices 150, 152, 154, 156 and 158,as described herein, coupled with the exchange computer system 100.

Herein, the phrase “coupled with” is defined to mean directly connectedto or indirectly connected through one or more intermediate components.Such intermediate components may include both hardware and softwarebased components. Further, to clarify the use in the pending claims andto hereby provide notice to the public, the phrases “at least one of<A>, <B>, . . . and <N>” or “at least one of <A>, <B>, . . . <N>, orcombinations thereof” are defined by the Applicant in the broadestsense, superseding any other implied definitions herebefore orhereinafter unless expressly asserted by the Applicant to the contrary,to mean one or more elements selected from the group comprising A, B, .. . and N, that is to say, any combination of one or more of theelements A, B, . . . or N including any one element alone or incombination with one or more of the other elements which may alsoinclude, in combination, additional elements not listed.

The exchange computer system 100 may be implemented with one or moremainframe, desktop or other computers, such as the example computer 200described herein with respect to FIG. 2. A user database 102 may beprovided which includes information identifying traders and other usersof exchange computer system 100, such as account numbers or identifiers,user names and passwords. An account data module 104 may be providedwhich may process account information that may be used during trades.

A match engine module 106 may be included to match bid and offer pricesand may be implemented with software that executes one or morealgorithms for matching bids and offers. A trade database 108 may beincluded to store information identifying trades and descriptions oftrades. In particular, a trade database may store informationidentifying the time that a trade took place and the contract price. Anorder book module 110 may be included to compute or otherwise determinecurrent bid and offer prices, e.g., in a continuous auction market, oralso operate as an order accumulation buffer for a batch auction market.

A market data module 112 may be included to collect market data andprepare the data for transmission to users. For example, the market datamodule 112 may prepare the market data feeds described herein.

A risk management module 114 may be included to compute and determine auser's risk utilization in relation to the user's defined riskthresholds. The risk management module 114 may also be configured todetermine risk assessments or exposure levels in connection withpositions held by a market participant. The risk management module 114may be configured to administer, manage or maintain one or moremargining mechanisms implemented by the exchange computer system 100.Such administration, management or maintenance may include managing anumber of database records reflective of margin accounts of the marketparticipants. In some embodiments, the risk management module 114implements one or more aspects of the disclosed embodiments, including,for instance, principal component analysis (PCA) based margining, inconnection with interest rate swap (IRS) portfolios, as describedherein.

A message management module 116 may be included to, among other things,receive, and extract orders from, electronic data transaction requestmessages. The message management module 116 may define a point ofingress into the exchange computer system 100 where messages are orderedand considered to be received by the system. This may be considered apoint of determinism in the exchange computer system 100 that definesthe earliest point where the system can ascribe an order of receipt toarriving messages. The point of determinism may or may not be at or nearthe demarcation point between the exchange computer system 100 and apublic/internet network infrastructure. The message management module116 processes messages by interpreting the contents of a message basedon the message transmit protocol, such as the transmission controlprotocol (“TCP”), to provide the content of the message for furtherprocessing by the exchange computer system.

The message management module 116 may also be configured to detectcharacteristics of an order for a transaction to be undertaken in anelectronic marketplace. For example, the message management module 116may identify and extract order content such as a price, product, volume,and associated market participant for an order. The message managementmodule 116 may also identify and extract data indicating an action to beexecuted by the exchange computer system 100 with respect to theextracted order. For example, the message management module 116 maydetermine the transaction type of the transaction requested in a givenmessage. A message may include an instruction to perform a type oftransaction. The transaction type may be, in one embodiment, arequest/offer/order to either buy or sell a specified quantity or unitsof a financial instrument at a specified price or value. The messagemanagement module 116 may also identify and extract other orderinformation and other actions associated with the extracted order. Allextracted order characteristics, other information, and associatedactions extracted from a message for an order may be collectivelyconsidered an order as described and referenced herein.

Order or message characteristics may include, for example, the state ofthe system after a message is received, arrival time (e.g., the time amessage arrives at the MSG or Market Segment Gateway), message type(e.g., new, modify, cancel), and the number of matches generated by amessage. Order or message characteristics may also include marketparticipant side (e.g., buyer or seller) or time in force (e.g., a gooduntil end of day order that is good for the full trading day, a gooduntil canceled ordered that rests on the order book until matched, or afill or kill order that is canceled if not filled immediately, or a filland kill order (FOK) that is filled to the maximum amount possible basedon the state of the order book at the time the FOK order is processed,and any remaining or unfilled/unsatisfied quantity is not stored on thebooks or allowed to rest).

An order processing module 118 may be included to decompose delta-based,spread instrument, bulk and other types of composite orders forprocessing by the order book module 110 and/or the match engine module106. The order processing module 118 may also be used to implement oneor more procedures related to clearing an order. The order may becommunicated from the message management module 116 to the orderprocessing module 118. The order processing module 118 may be configuredto interpret the communicated order, and manage the ordercharacteristics, other information, and associated actions as they areprocessed through an order book module 110 and eventually transacted onan electronic market. For example, the order processing module 118 maystore the order characteristics and other content and execute theassociated actions. In an embodiment, the order processing module 118may execute an associated action of placing the order into an order bookfor an electronic trading system managed by the order book module 110.In an embodiment, placing an order into an order book and/or into anelectronic trading system may be considered a primary action for anorder. The order processing module 118 may be configured in variousarrangements, and may be configured as part of the order book module110, part of the message management module 116, or as an independentfunctioning module.

As an intermediary to electronic trading transactions, the exchangebears a certain amount of risk in each transaction that takes place. Tothat end, the clearing house implements risk management mechanisms toprotect the exchange. One or more of the modules of the exchangecomputer system 100 may be configured to determine settlement prices forconstituent contracts, such as deferred month contracts, of spreadinstruments, such as for example, settlement module 120. A settlementmodule 120 (or settlement processor or other payment processor) may beincluded to provide one or more functions related to settling orotherwise administering transactions cleared by the exchange. Settlementmodule 120 of the exchange computer system 100 may implement one or moresettlement price determination techniques. Settlement-related functionsneed not be limited to actions or events occurring at the end of acontract term. For instance, in some embodiments, settlement-relatedfunctions may include or involve daily or other mark to marketsettlements for margining purposes. In some cases, the settlement module120 may be configured to communicate with the trade database 108 (or thememory(ies) on which the trade database 108 is stored) and/or todetermine a payment amount based on a spot price, the price of thefutures contract or other financial instrument, or other price data, atvarious times. The determination may be made at one or more points intime during the term of the financial instrument in connection with amargining mechanism. For example, the settlement module 120 may be usedto determine a mark to market amount on a daily basis during the term ofthe financial instrument. Such determinations may also be made on asettlement date for the financial instrument for the purposes of finalsettlement.

In some embodiments, the settlement module 120 may be integrated to anydesired extent with one or more of the other modules or processors ofthe exchange computer system 100. For example, the settlement module 120and the risk management module 114 may be integrated to any desiredextent. In some cases, one or more margining procedures or other aspectsof the margining mechanism(s) may be implemented by the settlementmodule 120.

One or more of the above-described modules of the exchange computersystem 100 may be used to gather or obtain data to support thesettlement price determination, as well as a subsequent marginrequirement determination. For example, the order book module 110 and/orthe market data module 112 may be used to receive, access, or otherwiseobtain market data, such as bid-offer values of orders currently on theorder books. The trade database 108 may be used to receive, access, orotherwise obtain trade data indicative of the prices and volumes oftrades that were recently executed in a number of markets. In somecases, transaction data (and/or bid/ask data) may be gathered orobtained from open outcry pits and/or other sources and incorporatedinto the trade and market data from the electronic trading system(s).

It should be appreciated that concurrent processing limits may bedefined by or imposed separately or in combination on one or more of thetrading system components, including the user database 102, the accountdata module 104, the match engine module 106, the trade database 108,the order book module 110, the market data module 112, the riskmanagement module 114, the message management module 116, the orderprocessing module 118, the settlement module 120, or other component ofthe exchange computer system 100.

The disclosed mechanisms may be implemented at any logical and/orphysical point(s), or combinations thereof, at which the relevantinformation/data (e.g., message traffic and responses thereto) may bemonitored or flows or is otherwise accessible or measurable, includingone or more gateway devices, modems, the computers or terminals of oneor more market participants, e.g., client computers, etc.

One skilled in the art will appreciate that one or more modulesdescribed herein may be implemented using, among other things, atangible computer-readable medium comprising computer-executableinstructions (e.g., executable software code). Alternatively, modulesmay be implemented as software code, firmware code, specificallyconfigured hardware or processors, and/or a combination of theaforementioned. For example, the modules may be embodied as part of anexchange 100 for financial instruments. It should be appreciated thedisclosed embodiments may be implemented as a different or separatemodule of the exchange computer system 100, or a separate computersystem coupled with the exchange computer system 100 so as to haveaccess to margin account record, pricing, and/or other data. Asdescribed herein, the disclosed embodiments may be implemented as acentrally accessible system or as a distributed system, e.g., where someof the disclosed functions are performed by the computer systems of themarket participants.

The trading network environment shown in FIG. 1 includes exemplarycomputer devices 150, 152, 154, 156 and 158 which depict differentexemplary methods or media by which a computer device may be coupledwith the exchange computer system 100 or by which a user maycommunicate, e.g., send and receive, trade or other informationtherewith. It should be appreciated that the types of computer devicesdeployed by traders and the methods and media by which they communicatewith the exchange computer system 100 is implementation dependent andmay vary and that not all of the depicted computer devices and/ormeans/media of communication may be used and that other computer devicesand/or means/media of communications, now available or later developedmay be used. Each computer device, which may comprise a computer 200described in more detail with respect to FIG. 2, may include a centralprocessor, specifically configured or otherwise, that controls theoverall operation of the computer and a system bus that connects thecentral processor to one or more conventional components, such as anetwork card or modem. Each computer device may also include a varietyof interface units and drives for reading and writing data or files andcommunicating with other computer devices and with the exchange computersystem 100. Depending on the type of computer device, a user caninteract with the computer with a keyboard, pointing device, microphone,pen device or other input device now available or later developed.

An exemplary computer device 150 is shown directly connected to exchangecomputer system 100, such as via a T1 line, a common local area network(LAN) or other wired and/or wireless medium for connecting computerdevices, such as the network 220 shown in FIG. 2 and described withrespect thereto. The exemplary computer device 150 is further shownconnected to a radio 168. The user of radio 168, which may include acellular telephone, smart phone, or other wireless proprietary and/ornon-proprietary device, may be a trader or exchange employee. The radiouser may transmit orders or other information to the exemplary computerdevice 150 or a user thereof. The user of the exemplary computer device150, or the exemplary computer device 150 alone and/or autonomously, maythen transmit the trade or other information to the exchange computersystem 100.

Exemplary computer devices 152 and 154 are coupled with a local areanetwork (“LAN”) 160 which may be configured in one or more of thewell-known LAN topologies, e.g., star, daisy chain, etc., and may use avariety of different protocols, such as Ethernet, TCP/IP, etc. Theexemplary computer devices 152 and 154 may communicate with each otherand with other computer and other devices which are coupled with the LAN160. Computer and other devices may be coupled with the LAN 160 viatwisted pair wires, coaxial cable, fiber optics or other wired orwireless media. As shown in FIG. 1, an exemplary wireless personaldigital assistant device (“PDA”) 158, such as a mobile telephone, tabletbased compute device, or other wireless device, may communicate with theLAN 160 and/or the Internet 162 via radio waves, such as via WiFi,Bluetooth and/or a cellular telephone based data communicationsprotocol. PDA 158 may also communicate with exchange computer system 100via a conventional wireless hub 164.

FIG. 1 also shows the LAN 160 coupled with a wide area network (“WAN”)162 which may be comprised of one or more public or private wired orwireless networks. In one embodiment, the WAN 162 includes the Internet162. The LAN 160 may include a router to connect LAN 160 to the Internet162. Exemplary computer device 156 is shown coupled directly to theInternet 162, such as via a modem, DSL line, satellite dish or any otherdevice for connecting a computer device to the Internet 162 via aservice provider therefore as is known. LAN 160 and/or WAN 162 may bethe same as the network 220 shown in FIG. 2 and described with respectthereto.

Users of the exchange computer system 100 may include one or more marketmakers 166 which may maintain a market by providing constant bid andoffer prices for a derivative or security to the exchange computersystem 100, such as via one of the exemplary computer devices depicted.The exchange computer system 100 may also exchange information withother match or trade engines, such as trade engine 170. One skilled inthe art will appreciate that numerous additional computers and systemsmay be coupled to exchange computer system 100. Such computers andsystems may include clearing, regulatory and fee systems.

The operations of computer devices and systems shown in FIG. 1 may becontrolled by computer-executable instructions stored on anon-transitory computer-readable medium. For example, the exemplarycomputer device 152 may store computer-executable instructions forreceiving order information from a user, transmitting that orderinformation to exchange computer system 100 in electronic messages,extracting the order information from the electronic messages, executingactions relating to the messages, and/or calculating values fromcharacteristics of the extracted order to facilitate matching orders andexecuting trades. In another example, the exemplary computer device 154may include computer-executable instructions for receiving market datafrom exchange computer system 100 and displaying that information to auser.

Numerous additional servers, computers, handheld devices, personaldigital assistants, telephones and other devices may also be connectedto exchange computer system 100. Moreover, one skilled in the art willappreciate that the topology shown in FIG. 1 is merely an example andthat the components shown in FIG. 1 may include other components notshown and be connected by numerous alternative topologies.

Referring now to FIG. 2, an illustrative embodiment of a generalcomputer system 200 is shown. The computer system 200 can include a setof instructions that can be executed to cause the computer system 200 toperform any one or more of the methods or computer based functionsdisclosed herein. The computer system 200 may operate as a standalonedevice or may be connected, e.g., using a network, to other computersystems or peripheral devices. Any of the components discussed herein,such as processor 202, may be a computer system 200 or a component inthe computer system 200. The computer system 200 may be specificallyconfigured to implement a match engine, margin processing, payment orclearing function on behalf of an exchange, such as the ChicagoMercantile Exchange, of which the disclosed embodiments are a componentthereof.

In a networked deployment, the computer system 200 may operate in thecapacity of a server or as a client user computer in a client-serveruser network environment, or as a peer computer system in a peer-to-peer(or distributed) network environment. The computer system 200 can alsobe implemented as or incorporated into various devices, such as apersonal computer (PC), a tablet PC, a set-top box (STB), a personaldigital assistant (PDA), a mobile device, a palmtop computer, a laptopcomputer, a desktop computer, a communications device, a wirelesstelephone, a land-line telephone, a control system, a camera, a scanner,a facsimile machine, a printer, a pager, a personal trusted device, aweb appliance, a network router, switch or bridge, or any other machinecapable of executing a set of instructions (sequential or otherwise)that specify actions to be taken by that machine. In a particularembodiment, the computer system 200 can be implemented using electronicdevices that provide voice, video or data communication. Further, whilea single computer system 200 is illustrated, the term “system” shallalso be taken to include any collection of systems or sub-systems thatindividually or jointly execute a set, or multiple sets, of instructionsto perform one or more computer functions.

As illustrated in FIG. 2, the computer system 200 may include aprocessor 202, e.g., a central processing unit (CPU), a graphicsprocessing unit (GPU), or both. The processor 202 may be a component ina variety of systems. For example, the processor 202 may be part of astandard personal computer or a workstation. The processor 202 may beone or more general processors, digital signal processors, specificallyconfigured processors, application specific integrated circuits, fieldprogrammable gate arrays, servers, networks, digital circuits, analogcircuits, combinations thereof, or other now known or later developeddevices for analyzing and processing data. The processor 202 mayimplement a software program, such as code generated manually (i.e.,programmed).

The computer system 200 may include a memory 204 that can communicatevia a bus 208. The memory 204 may be a main memory, a static memory, ora dynamic memory. The memory 204 may include, but is not limited to,computer readable storage media such as various types of volatile andnon-volatile storage media, including but not limited to random accessmemory, read-only memory, programmable read-only memory, electricallyprogrammable read-only memory, electrically erasable read-only memory,flash memory, magnetic tape or disk, optical media and the like. In oneembodiment, the memory 204 includes a cache or random access memory forthe processor 202. In alternative embodiments, the memory 204 isseparate from the processor 202, such as a cache memory of a processor,the system memory, or other memory. The memory 204 may be an externalstorage device or database for storing data. Examples include a harddrive, compact disc (“CD”), digital video disc (“DVD”), memory card,memory stick, floppy disc, universal serial bus (“USB”) memory device,or any other device operative to store data. The memory 204 is operableto store instructions executable by the processor 202. The functions,acts or tasks illustrated in the figures or described herein may beperformed by the programmed processor 202 executing the instructions 212stored in the memory 204. The functions, acts or tasks are independentof the particular type of instructions set, storage media, processor orprocessing strategy and may be performed by software, hardware,integrated circuits, firm-ware, micro-code and the like, operating aloneor in combination. Likewise, processing strategies may includemultiprocessing, multitasking, parallel processing and the like.

As shown, the computer system 200 may further include a display unit214, such as a liquid crystal display (LCD), an organic light emittingdiode (OLED), a flat panel display, a solid state display, a cathode raytube (CRT), a projector, a printer or other now known or later developeddisplay device for outputting determined information. The display 214may act as an interface for the user to see the functioning of theprocessor 202, or specifically as an interface with the software storedin the memory 204 or in the drive unit 206.

Additionally, the computer system 200 may include an input device 216configured to allow a user to interact with any of the components ofsystem 200. The input device 216 may be a number pad, a keyboard, or acursor control device, such as a mouse, or a joystick, touch screendisplay, remote control or any other device operative to interact withthe system 200.

In a particular embodiment, as depicted in FIG. 2, the computer system200 may also include a disk or optical drive unit 206. The disk driveunit 206 may include a computer-readable medium 210 in which one or moresets of instructions 212, e.g., software, can be embedded. Further, theinstructions 212 may embody one or more of the methods or logic asdescribed herein. In a particular embodiment, the instructions 212 mayreside completely, or at least partially, within the memory 204 and/orwithin the processor 202 during execution by the computer system 200.The memory 204 and the processor 202 also may include computer-readablemedia as discussed herein.

The present disclosure contemplates a computer-readable medium thatincludes instructions 212 or receives and executes instructions 212responsive to a propagated signal, so that a device connected to anetwork 220 can communicate voice, video, audio, images or any otherdata over the network 220. Further, the instructions 212 may betransmitted or received over the network 220 via a communicationinterface 218. The communication interface 218 may be a part of theprocessor 202 or may be a separate component. The communicationinterface 218 may be created in software or may be a physical connectionin hardware. The communication interface 218 is configured to connectwith a network 220, external media, the display 214, or any othercomponents in system 200, or combinations thereof. The connection withthe network 220 may be a physical connection, such as a wired Ethernetconnection or may be established wirelessly. Likewise, the additionalconnections with other components of the system 200 may be physicalconnections or may be established wirelessly.

The network 220 may include wired networks, wireless networks, orcombinations thereof. The wireless network may be a cellular telephonenetwork, an 802.11, 802.16, 802.20, or WiMax network. Further, thenetwork 220 may be a public network, such as the Internet, a privatenetwork, such as an intranet, or combinations thereof, and may utilize avariety of networking protocols now available or later developedincluding, but not limited to, TCP/IP based networking protocols.

Embodiments of the subject matter and the functional operationsdescribed in this specification can be implemented in digital electroniccircuitry, or in computer software, firmware, or hardware, including thestructures disclosed in this specification and their structuralequivalents, or in combinations of one or more of them. Embodiments ofthe subject matter described in this specification can be implemented asone or more computer program products, i.e., one or more modules ofcomputer program instructions encoded on a computer readable medium forexecution by, or to control the operation of, data processing apparatus.While the computer-readable medium is shown to be a single medium, theterm “computer-readable medium” includes a single medium or multiplemedia, such as a centralized or distributed database, and/or associatedcaches and servers that store one or more sets of instructions. The term“computer-readable medium” shall also include any medium that is capableof storing, encoding or carrying a set of instructions for execution bya processor or that cause a computer system to perform any one or moreof the methods or operations disclosed herein. The computer readablemedium can be a machine-readable storage device, a machine-readablestorage substrate, a memory device, or a combination of one or more ofthem. The term “data processing apparatus” encompasses all apparatus,devices, and machines for processing data, including by way of example aprogrammable processor, a computer, or multiple processors or computers.The apparatus can include, in addition to hardware, code that creates anexecution environment for the computer program in question, e.g., codethat constitutes processor firmware, a protocol stack, a databasemanagement system, an operating system, or a combination of one or moreof them.

In a particular non-limiting, exemplary embodiment, thecomputer-readable medium can include a solid-state memory such as amemory card or other package that houses one or more non-volatileread-only memories. Further, the computer-readable medium can be arandom access memory or other volatile re-writable memory. Additionally,the computer-readable medium can include a magneto-optical or opticalmedium, such as a disk or tapes or other storage device to capturecarrier wave signals such as a signal communicated over a transmissionmedium. A digital file attachment to an e-mail or other self-containedinformation archive or set of archives may be considered a distributionmedium that is a tangible storage medium. Accordingly, the disclosure isconsidered to include any one or more of a computer-readable medium or adistribution medium and other equivalents and successor media, in whichdata or instructions may be stored.

In an alternative embodiment, dedicated or otherwise specificallyconfigured hardware implementations, such as application specificintegrated circuits, programmable logic arrays and other hardwaredevices, can be constructed to implement one or more of the methodsdescribed herein. Applications that may include the apparatus andsystems of various embodiments can broadly include a variety ofelectronic and computer systems. One or more embodiments describedherein may implement functions using two or more specific interconnectedhardware modules or devices with related control and data signals thatcan be communicated between and through the modules, or as portions ofan application-specific integrated circuit. Accordingly, the presentsystem encompasses software, firmware, and hardware implementations.

In accordance with various embodiments of the present disclosure, themethods described herein may be implemented by software programsexecutable by a computer system. Further, in an exemplary, non-limitedembodiment, implementations can include distributed processing,component/object distributed processing, and parallel processing.Alternatively, virtual computer system processing can be constructed toimplement one or more of the methods or functionality as describedherein.

Although the present specification describes components and functionsthat may be implemented in particular embodiments with reference toparticular standards and protocols, the invention is not limited to suchstandards and protocols. For example, standards for Internet and otherpacket switched network transmission (e.g., TCP/IP, UDP/IP, HTML, HTTP,HTTPS) represent examples of the state of the art. Such standards areperiodically superseded by faster or more efficient equivalents havingessentially the same functions. Accordingly, replacement standards andprotocols having the same or similar functions as those disclosed hereinare considered equivalents thereof.

A computer program (also known as a program, software, softwareapplication, script, or code) can be written in any form of programminglanguage, including compiled or interpreted languages, and it can bedeployed in any form, including as a standalone program or as a module,component, subroutine, or other unit suitable for use in a computingenvironment. A computer program does not necessarily correspond to afile in a file system. A program can be stored in a portion of a filethat holds other programs or data (e.g., one or more scripts stored in amarkup language document), in a single file dedicated to the program inquestion, or in multiple coordinated files (e.g., files that store oneor more modules, sub programs, or portions of code). A computer programcan be deployed to be executed on one computer or on multiple computersthat are located at one site or distributed across multiple sites andinterconnected by a communication network.

The processes and logic flows described in this specification can beperformed by one or more programmable processors executing one or morecomputer programs to perform functions by operating on input data andgenerating output. The processes and logic flows can also be performedby, and apparatus can also be implemented as, special purpose logiccircuitry, e.g., an FPGA (field programmable gate array) or an ASIC(application specific integrated circuit).

Processors suitable for the execution of a computer program include, byway of example, both general and special purpose microprocessors, andanyone or more processors of any kind of digital computer. Generally, aprocessor will receive instructions and data from a read only memory ora random access memory or both. The essential elements of a computer area processor for performing instructions and one or more memory devicesfor storing instructions and data. Generally, a computer will alsoinclude, or be operatively coupled to receive data from or transfer datato, or both, one or more mass storage devices for storing data, e.g.,magnetic, magneto optical disks, or optical disks. However, a computerneed not have such devices. Moreover, a computer can be embedded inanother device, e.g., a mobile telephone, a personal digital assistant(PDA), a mobile audio player, a Global Positioning System (GPS)receiver, to name just a few. Computer readable media suitable forstoring computer program instructions and data include all forms ofnon-volatile memory, media and memory devices, including by way ofexample semiconductor memory devices, e.g., EPROM, EEPROM, and flashmemory devices; magnetic disks, e.g., internal hard disks or removabledisks; magneto optical disks; and CD ROM and DVD-ROM disks. Theprocessor and the memory can be supplemented by, or incorporated in,special purpose logic circuitry.

As used herein, the terms “microprocessor” or “general-purposeprocessor” (“GPP”) may refer to a hardware device that fetchesinstructions and data from a memory or storage device and executes thoseinstructions (for example, an Intel Xeon processor or an AMD Opteronprocessor) to then, for example, process the data in accordancetherewith. The term “reconfigurable logic” may refer to any logictechnology whose form and function can be significantly altered (i.e.,reconfigured) in the field post-manufacture as opposed to amicroprocessor, whose function can change post-manufacture, e.g. viacomputer executable software code, but whose form, e.g. thearrangement/layout and interconnection of logical structures, is fixedat manufacture. The term “software” may refer to data processingfunctionality that is deployed on a GPP. The term “firmware” may referto data processing functionality that is deployed on reconfigurablelogic. One example of a reconfigurable logic is a field programmablegate array (“FPGA”) which is a reconfigurable integrated circuit. AnFPGA may contain programmable logic components called “logic blocks”,and a hierarchy of reconfigurable interconnects that allow the blocks tobe “wired together”, somewhat like many (changeable) logic gates thatcan be inter-wired in (many) different configurations. Logic blocks maybe configured to perform complex combinatorial functions, or merelysimple logic gates like AND, OR, NOT and XOR. An FPGA may furtherinclude memory elements, which may be simple flip-flops or more completeblocks of memory.

To provide for interaction with a user, embodiments of the subjectmatter described in this specification can be implemented on a devicehaving a display, e.g., a CRT (cathode ray tube) or LCD (liquid crystaldisplay) monitor, for displaying information to the user and a keyboardand a pointing device, e.g., a mouse or a trackball, by which the usercan provide input to the computer. Other kinds of devices can be used toprovide for interaction with a user as well. Feedback provided to theuser can be any form of sensory feedback, e.g., visual feedback,auditory feedback, or tactile feedback. Input from the user can bereceived in any form, including acoustic, speech, or tactile input.

Embodiments of the subject matter described in this specification can beimplemented in a computing system that includes a back end component,e.g., a data server, or that includes a middleware component, e.g., anapplication server, or that includes a front end component, e.g., aclient computer having a graphical user interface or a Web browserthrough which a user can interact with an implementation of the subjectmatter described in this specification, or any combination of one ormore such back end, middleware, or front end components. The componentsof the system can be interconnected by any form or medium of digitaldata communication, e.g., a communication network. Examples ofcommunication networks include a local area network (“LAN”) and a widearea network (“WAN”), e.g., the Internet.

The computing system can include clients and servers. A client andserver are generally remote from each other and typically interactthrough a communication network. The relationship of client and serverarises by virtue of computer programs running on the respectivecomputers and having a client-server relationship to each other.

It should be appreciated that the disclosed embodiments may beapplicable to other types of messages depending upon the implementation.Further, the messages may comprise one or more data packets, datagramsor other collection of data formatted, arranged configured and/orpackaged in a particular one or more protocols, e.g., the FIX protocol,TCP/IP, Ethernet, etc., suitable for transmission via a network 214 aswas described, such as the message format and/or protocols described inU.S. Pat. No. 7,831,491 and U.S. Patent Publication No. 2005/0096999 A1,both of which are incorporated by reference herein in their entiretiesand relied upon. Further, the disclosed message management system may beimplemented using an open message standard implementation, such as FIX,FIX Binary, FIX/FAST, or by an exchange-provided API.

The embodiments described herein may utilize trade related electronicmessages such as mass quote messages, individual order messages,modification messages, cancellation messages, etc., so as to enacttrading activity in an electronic market. The trading entity and/ormarket participant may have one or multiple trading terminals associatedwith the session. Furthermore, the financial instruments may befinancial derivative products. Derivative products may include futurescontracts, options on futures contracts, futures contracts that arefunctions of or related to other futures contracts, swaps, swaptions, orother financial instruments that have their price related to or derivedfrom an underlying product, security, commodity, equity, index, orinterest rate product. In one embodiment, the orders are for optionscontracts that belong to a common option class. Orders may also be forbaskets, quadrants, other combinations of financial instruments, etc.The option contracts may have a plurality of strike prices and/orcomprise put and call contracts. A mass quote message may be received atan exchange. As used herein, an exchange computing system 100 includes aplace or system that receives and/or executes orders.

In an embodiment, a plurality of electronic messages is received fromthe network. The plurality of electronic messages may be received at anetwork interface for the electronic trading system. The plurality ofelectronic messages may be sent from market participants. The pluralityof messages may include order characteristics and be associated withactions to be executed with respect to an order that may be extractedfrom the order characteristics. The action may involve any action asassociated with transacting the order in an electronic trading system.The actions may involve placing the orders within a particular marketand/or order book of a market in the electronic trading system.

In an embodiment, an incoming transaction may be received. The incomingtransaction may be from, and therefore associated with, a marketparticipant of an electronic market managed by an electronic tradingsystem. The transaction may involve an order as extracted from areceived message, and may have an associated action. The actions mayinvolve placing an order to buy or sell a financial product in theelectronic market, or modifying or deleting such an order. In anembodiment, the financial product may be based on an associatedfinancial instrument which the electronic market is established totrade.

In an embodiment, the action associated with the transaction isdetermined. For example, it may be determined whether the incomingtransaction comprises an order to buy or sell a quantity of theassociated financial instrument or an order to modify or cancel anexisting order in the electronic market. Orders to buy or sell andorders to modify or cancel may be acted upon differently by theelectronic market. For example, data indicative of differentcharacteristics of the types of orders may be stored.

In an embodiment, data relating to the received transaction is stored.The data may be stored in any device, or using any technique, operableto store and provide recovery of data. For example, a memory 204 orcomputer readable medium 210, may be used to store data, as is describedwith respect to FIG. 2 in further detail herein. Data may be storedrelating received transactions for a period of time, indefinitely, orfor a rolling most recent time period such that the stored data isindicative of the market participant's recent activity in the electronicmarket.

If and/or when a transaction is determined to be an order to modify orcancel a previously placed, or existing, order, data indicative of theseactions may be stored. For example, data indicative of a running countof a number or frequency of the receipt of modify or cancel orders fromthe market participant may be stored. A number may be a total number ofmodify or cancel orders received from the market participant, or anumber of modify or cancel orders received from the market participantover a specified time. A frequency may be a time based frequency, as ina number of cancel or modify orders per unit of time, or a number ofcancel or modify orders received from the market participant as apercentage of total transactions received from the participant, whichmay or may not be limited by a specified length of time.

If and/or when a transaction is determined to be an order to buy or sella financial product, or financial instrument, other indicative data maybe stored. For example, data indicative of quantity and associated priceof the order to buy or sell may be stored.

Data indicative of attempts to match incoming orders may also be stored.The data may be stored in any device, or using any technique, operableto store and provide recovery of data. For example, a memory 204 orcomputer readable medium 210, may be used to store data, as is describedwith respect to FIG. 2. The acts of the process as described herein mayalso be repeated. As such, data for multiple received transactions formultiple market participants may be stored and used as describe herein.

The order processing module 118 may also store data indicative ofcharacteristics of the extracted orders. For example, the orderprocessing module may store data indicative of orders having anassociated modify or cancel action, such as by recording a count of thenumber of such orders associated with particular market participants.The order processing module may also store data indicative of quantitiesand associated prices of orders to buy or sell a product placed in themarket order book 110, as associated with particular marketparticipants.

Also, the order processing module 118 may be configured to calculate andassociate with particular orders a value indicative of an associatedmarket participant's market activity quality, which is a valueindicative of whether the market participant's market activity increasesor tends to increase liquidity of a market. This value may be determinedbased on the price of the particular order, previously stored quantitiesof orders from the associated market participant, the previously storeddata indicative of previously received orders to modify or cancel asassociated with the market participant, and previously stored dataindicative of a result of the attempt to match previously receivedorders stored in association with the market participant. The orderprocessing module 118 may determine or otherwise calculate scoresindicative of the quality value based on these stored extracted ordercharacteristics, such as an MQI as described herein.

Further, electronic trading systems may perform actions on orders placedfrom received messages based on various characteristics of the messagesand/or market participants associated with the messages. These actionsmay include matching the orders either during a continuous auctionprocess, or at the conclusion of a collection period during a batchauction process. The matching of orders may be by any technique.

The matching of orders may occur based on a priority indicated by thecharacteristics of orders and market participants associated with theorders. Orders having a higher priority may be matched before orders ofa lower priority. Such priority may be determined using varioustechniques. For example, orders that were indicated by messages receivedearlier may receive a higher priority to match than orders that wereindicated by messages received later. Also, scoring or grading of thecharacteristics may provide for priority determination. Data indicativeof order matches may be stored by a match engine and/or an orderprocessing module 118, and used for determining MQI scores of marketparticipants.

Order Book Object Data Structures

In one embodiment, the messages and/or values received for each objectmay be stored in queues according to value and/or priority techniquesimplemented by an exchange computing system 100. FIG. 3A illustrates anexample data structure 300, which may be stored in a memory or otherstorage device, such as the memory 204 or storage device 206 describedwith respect to FIG. 2, for storing and retrieving messages related todifferent values for the same action for an object. For example, datastructure 300 may be a set of queues or linked lists for multiple valuesfor an action, e.g., bid, on an object. Data structure 300 may beimplemented as a database. It should be appreciated that the system maystore multiple values for the same action for an object, for example,because multiple users submitted messages to buy specified quantities ofan object at different values. Thus, in one embodiment, the exchangecomputing system may keep track of different orders or messages forbuying or selling quantities of objects at specified values.

Although the present application contemplates using queue datastructures for storing messages in a memory, the implementation mayinvolve additional pointers, i.e., memory address pointers, or linkingto other data structures. Incoming messages may be stored at anidentifiable memory address. The transaction processor can traversemessages in order by pointing to and retrieving different messages fromthe different memories. Thus, messages that may be depictedsequentially, e.g., in FIG. 3B below, may actually be stored in memoryin disparate locations. The software programs implementing thetransaction processing may retrieve and process messages in sequencefrom the various disparate (e.g., random) locations. Thus, in oneembodiment, each queue may store different values, which could representprices, where each value points to or is linked to the messages (whichmay themselves be stored in queues and sequenced according to prioritytechniques, such as prioritizing by value) that will match at thatvalue. For example, as shown in FIG. 3A, all of the values relevant toexecuting an action at different values for an object are stored in aqueue. Each value in turn points to, e.g., a linked list or queuelogically associated with the values. The linked list stores themessages that instruct the exchange computing system to buy specifiedquantities of the object at the corresponding value.

The sequence of the messages in the message queues connected to eachvalue may be determined by exchange implemented priority techniques. Forexample, in FIG. 3A, messages M1, M2, M3 and M4 are associated withperforming an action (e.g., buying or selling) a certain number of units(may be different for each message) at Value 1. M1 has priority over M2,which has priority over M3, which has priority over M4. Thus, if acounter order matches at Value 1, the system fills as much quantity aspossible associated with M1 first, then M2, then M3, and then M4.

In the illustrated examples, the values may be stored in sequentialorder, and the best or lead value for a given queue may be readilyretrievable by and/or accessible to the disclosed system. Thus, in oneembodiment, the value having the best priority may be illustrated asbeing in the topmost position in a queue, although the system may beconfigured to place the best priority message in some otherpredetermined position. In the example of FIG. 3A, Value 1 is shown asbeing the best value or lead value, or the top of the book value, for anexample Action.

A lead acquisition value may be the best or lead value in an acquisitionqueue of an order book object, and a lead relinquish value may be thebest or lead value in a relinquish queue of the order book object.

FIG. 3B illustrates an example alternative data structure 350 forstoring and retrieving messages and related values. It should beappreciated that matches occur based on values, and so all the messagesrelated to a given value may be prioritized over all other messagesrelated to a different value. As shown in FIG. 3B, the messages may bestored in one queue and grouped by values according to the hierarchy ofthe values. The hierarchy of the values may depend on the action to beperformed.

For example, if a queue is a sell queue (e.g., the Action is Sell), thelowest value may be given the best priority and the highest value may begiven the lowest priority. Thus, as shown in FIG. 3B, if Value 1 islower than Value 2 which is lower than Value 3, Value 1 messages may beprioritized over Value 2, which in turn may be prioritized over Value 3.

Within Value 1, M1 is prioritized over M2, which in turn is prioritizedover M3, which in turn is prioritized over M4. Within Value 2, M5 isprioritized over M6, which in turn is prioritized over M7, which in turnis prioritized over M8. Within Value 3, M9 is prioritized over M10,which in turn is prioritized over M11, which in turn is prioritized overM12.

Alternatively, the messages may be stored in a tree-node data structurethat defines the priorities of the messages. In one embodiment, themessages may make up the nodes.

In one embodiment, the system may traverse through a number of differentvalues and associated messages when processing an incoming message.Traversing values may involve the processor loading each value, checkingthat value and deciding whether to load another value, i.e., byaccessing the address pointed at by the address pointer value. Inparticular, referring to FIG. 3B, if the queue is for selling an objectfor the listed Values 1, 2 and 3 (where Value 1 is lower than Value 2which is lower than Value 3), and if the system receives an incomingaggressing order to buy quantity X at a Value 4 that is greater thanValues 1, 2, and 3, the system will fill as much of quantity X aspossible by first traversing through the messages under Value 1 (insequence M1, M2, M3, M4). If any of the quantity of X remains, thesystem traverses down the prioritized queue until all of the incomingorder is filled (e.g., all of X is matched) or until all of thequantities of M1 through M12 are filled. Any remaining, unmatchedquantity remains on the books, e.g., as a resting order at Value 4,which was the entered value or the message's value.

The system may traverse the queues and check the values in a queue, andupon finding the appropriate value, may locate the messages involved inmaking that value available to the system. When an outright messagevalue is stored in a queue, and when that outright message is involvedin a trade or match, the system may check the queue for the value, andthen may check the data structure storing messages associated with thatvalue.

In one embodiment, an exchange computing system may convert allfinancial instruments to objects. In one embodiment, an object mayrepresent the order book for a financial instrument. Moreover, in oneembodiment, an object may be defined by two queues, one queue for eachaction that can be performed by a user on the object. For example, anorder book converted to an object may be represented by an Ask queue anda Bid queue. Resting messages or orders associated with the respectivefinancial instrument may be stored in the appropriate queue and recalledtherefrom.

In one embodiment, the messages associated with objects may be stored inspecific ways depending on the characteristics of the various messagesand the states of the various objects in memory. For example, a systemmay hold certain resting messages in queue until the message is to beprocessed, e.g., the message is involved in a match. The order, sequenceor priority given to messages may depend on the characteristics of themessage. For example, in certain environments, messages may indicate anaction that a computer in the system should perform. Actions may becomplementary actions, or require more than one message to complete. Forexample, a system may be tasked with matching messages or actionscontained within messages. The messages that are not matched may bequeued by the system in a data queue or other structure, e.g., a datatree having nodes representing messages or orders.

The queues are structured so that the messages are stored in sequenceaccording to priority. Although the embodiments are disclosed as beingimplemented in queues, it should be understood that different datastructures such as for example linked lists or trees may also be used.

The system may include separate data structures, e.g., queues, fordifferent actions associated with different objects within the system.For example, in one embodiment, the system may include a queue for eachpossible action that can be performed on an object. The action may beassociated with a value. The system prioritizes the actions based inpart on the associated value.

For example, as shown in FIG. 3C, the order book module of a computingsystem may include several paired queues, such as queues Bid and Ask foran object 302 (e.g., Object A). The system may include two queues, orone pair of queues, for each object that is matched or processed by thesystem. In one embodiment, the system stores messages in the queues thathave not yet been matched or processed. FIG. 3C may be an implementationof the data structures disclosed in FIGS. 3A and/or 3B. Each queue mayhave a top of book, or lead, position, such as positions 304 and 306,which stores data that is retrievable.

The queues may define the priority or sequence in which messages areprocessed upon a match event. For example, two messages stored in aqueue may represent performing the same action at the same value. When athird message is received by the system that represents a matchingaction at the same value, the system may need to select one of the twowaiting, or resting, messages as the message to use for a match. Thus,when multiple messages can be matched at the same value, the exchangemay have a choice or some flexibility regarding the message that ismatched. The queues may define the priority in which orders that areotherwise equivalent (e.g., same action for the same object at the samevalue) are processed.

The system may include a pair of queues for each object, e.g., a bid andask queue for each object. Each queue may be for example implementedutilizing the data structure of FIG. 3B. The exchange may be able tospecify the conditions upon which a message for an object should beplaced in a queue. For example, the system may include one queue foreach possible action that can be performed on an object. The system maybe configured to process messages that match with each other. In oneembodiment, a message that indicates performing an action at a value maymatch with a message indicating performing a corresponding action at thesame value. Or, the system may determine the existence of a match whenmessages for the same value exist in both queues of the same object. Themessages may be received from the same or different users or traders.

The queues illustrated in FIG. 3C hold or store messages received by acomputing exchange, e.g., messages submitted by a user to the computingexchange, and waiting for a proper match. It should be appreciated thatthe queues may also hold or store implieds, e.g., implied messagesgenerated by the exchange system, such as messages implied in or impliedout as described herein. The system thus adds messages to the queues asthey are received, e.g., messages submitted by users, or generated,e.g., implied messages generated by the exchanges. The sequence orprioritization of messages in the queues is based on information aboutthe messages and the overall state of the various objects in the system.

When the data transaction processing system is implemented as anexchange computing system, as discussed above, different clientcomputers submit electronic data transaction request messages to theexchange computing system. Electronic data transaction request messagesinclude requests to perform a transaction on a data object, e.g., at avalue for a quantity. The exchange computing system includes atransaction processor, e.g., a hardware matching processor or matchengine, that matches, or attempts to match, pairs of messages with eachother. For example, messages may match if they contain counterinstructions (e.g., one message includes instructions to buy, the othermessage includes instructions to sell) for the same product at the samevalue. In some cases, depending on the nature of the message, the valueat which a match occurs may be the submitted value or a better value. Abetter value may mean higher or lower value depending on the specifictransaction requested. For example, a buy order may match at thesubmitted buy value or a lower (e.g., better) value. A sell order maymatch at the submitted sell value or a higher (e.g., better) value.

Transaction Processor Data Structures

FIG. 4A illustrates an example embodiment of a data structure used toimplement match engine module 106. Match engine module 106 may include aconversion component 402, pre-match queue 404, match component 406,post-match queue 408 and publish component 410.

Although the embodiments are disclosed as being implemented in queues,it should be understood that different data structures, such as forexample linked lists or trees, may also be used. Although theapplication contemplates using queue data structures for storingmessages in a memory, the implementation may involve additionalpointers, i.e., memory address pointers, or linking to other datastructures. Thus, in one embodiment, each incoming message may be storedat an identifiable memory address. The transaction processing componentscan traverse messages in order by pointing to and retrieving differentmessages from the different memories. Thus, messages that may beprocessed sequentially in queues may actually be stored in memory indisparate locations. The software programs implementing the transactionprocessing may retrieve and process messages in sequence from thevarious disparate (e.g., random) locations.

The queues described herein may, in one embodiment, be structured sothat the messages are stored in sequence according to time of receipt,e.g., they may be first in first out (FIFO) queues.

The match engine module 106 may be an example of a transactionprocessing system. The pre-match queue 404 may be an example of apre-transaction queue. The match component 406 may be an example of atransaction component. The post-match queue 408 may be an example of apost-transaction queue. The publish component 410 may be an example of adistribution component. The transaction component may process messagesand generate transaction component results.

It should be appreciated that match engine module 106 may not includeall of the components described herein. For example, match engine module106 may only include pre-match queue 404 and match component 406, asshown in FIG. 4B. In one embodiment, the latency detection system maydetect how long a message waits in a pre-match queue 404 (e.g.,latency), and compares the latency to the maximum allowable latencyassociated with the message.

In one embodiment, the publish component may be a distribution componentthat can distribute data to one or more market participant computers. Inone embodiment, match engine module 106 operates according to a firstin, first out (FIFO) ordering. The conversion component 402 converts orextracts a message received from a trader via the Market Segment Gatewayor MSG into a message format that can be input into the pre-match queue404.

Messages from the pre-match queue may enter the match component 406sequentially and may be processed sequentially. In one regard, thepre-transaction queue, e.g., the pre-match queue, may be considered tobe a buffer or waiting spot for messages before they can enter and beprocessed by the transaction component, e.g., the match component. Thematch component matches orders, and the time a messages spends beingprocessed by the match component can vary, depending on the contents ofthe message and resting orders on the book. Thus, newly receivedmessages wait in the pre-transaction queue until the match component isready to process those messages. Moreover, messages are received andprocessed sequentially or in a first-in, first-out (FIFO) methodology.The first message that enters the pre-match or pre-transaction queuewill be the first message to exit the pre-match queue and enter thematch component. In one embodiment, there is no out-of-order messageprocessing for messages received by the transaction processing system.The pre-match and post-match queues are, in one embodiment, fixed insize, and any messages received when the queues are full may need towait outside the transaction processing system or be re-sent to thetransaction processing system.

The match component 406 processes an order or message, at which pointthe transaction processing system may consider the order or message ashaving been processed. The match component 406 may generate one messageor more than one message, depending on whether an incoming order wassuccessfully matched by the match component. An order message thatmatches against a resting order in the order book may generate dozens orhundreds of messages. For example, a large incoming order may matchagainst several smaller resting orders at the same price level. Forexample, if many orders match due to a new order message, the matchengine needs to send out multiple messages informing traders whichresting orders have matched. Or, an order message may not match anyresting order and only generate an acknowledgement message. Thus, thematch component 406 in one embodiment will generate at least onemessage, but may generate more messages, depending upon the activitiesoccurring in the match component. For example, the more orders that arematched due to a given message being processed by the match component,the more time may be needed to process that message. Other messagesbehind that given message will have to wait in the pre-match queue.

Messages resulting from matches in the match component 406 enter thepost-match queue 408. The post-match queue may be similar infunctionality and structure to the pre-match queue discussed above,e.g., the post-match queue is a FIFO queue of fixed size. As illustratedin FIG. 4A, a difference between the pre- and post-match queues may bethe location and contents of the structures, namely, the pre-match queuestores messages that are waiting to be processed, whereas the post-matchqueue stores match component results due to matching by the matchcomponent. The match component receives messages from the pre-matchqueue, and sends match component results to the post-match queue. In oneembodiment, the time that results messages, generated due to thetransaction processing of a given message, spend in the post-match queueis not included in the latency calculation for the given message.

Messages from the post-match queue 408 enter the publish component 410sequentially and are published via the MSG sequentially. Thus, themessages in the post-match queue 408 are an effect or result of themessages that were previously in the pre-match queue 404. In otherwords, messages that are in the pre-match queue 404 at any given timewill have an impact on or affect the contents of the post-match queue408, depending on the events that occur in the match component 406 oncethe messages in the pre-match queue 404 enter the match component 406.

As noted above, the match engine module 106 in one embodiment operatesin a first in first out (FIFO) scheme. In other words, the first messagethat enters the match engine module 106 is the first message that isprocessed by the match engine module 106. Thus, the match engine module106 in one embodiment processes messages in the order the messages arereceived. In FIG. 4A, as shown by the data flow arrow, data is processedsequentially by the illustrated structures from left to right, beginningat the conversion component 402, to the pre-match queue, to the matchcomponent 406, to the post-match queue 408, and to the publish component410. The overall transaction processing system operates in a FIFO schemesuch that data flows from element 402 to 404 to 406 to 408 to 410, inthat order. If any one of the queues or components of the transactionprocessing system experiences a delay, that creates a backlog for thestructures preceding the delayed structure. For example, if the match ortransaction component is undergoing a high processing volume, and if thepre-match or pre-transaction queue is full of messages waiting to enterthe match or transaction component, the conversion component may not beable to add any more messages to the pre-match or pre-transaction queue.

Messages wait in the pre-match queue. The time a message waits in thepre-match queue depends upon how many messages are ahead of that message(i.e., earlier messages), and how much time each of the earlier messagesspends being serviced or processed by the match component. Messages alsowait in the post-match queue. The time a message waits in the post-matchqueue depends upon how many messages are ahead of that message (i.e.,earlier messages), and how much time each of the earlier messages spendsbeing serviced or processed by the publish component. These wait timesmay be viewed as a latency that can affect a market participant'strading strategy.

After a message is published (after being processed by the componentsand/or queues of the match engine module), e.g., via a market data feed,the message becomes public information and is publicly viewable andaccessible. Traders consuming such published messages may act upon thosemessage, e.g., submit additional new input messages to the exchangecomputing system responsive to the published messages.

The match component attempts to match aggressing or incoming ordersagainst resting orders. If an aggressing order does not match anyresting orders, then the aggressing order may become a resting order, oran order resting on the books. For example, if a message includes a neworder that is specified to have a one-year time in force, and the neworder does not match any existing resting order, the new order willessentially become a resting order to be matched (or attempted to bematched) with some future aggressing order. The new order will thenremain on the books for one year. On the other hand, an order specifiedas a fill or kill (e.g., if the order cannot be filled or matched withan order currently resting on the books, the order should be canceled)will never become a resting order, because it will either be filled ormatched with a currently resting order, or it will be canceled. Theamount of time needed to process or service a message once that messagehas entered the match component may be referred to as a service time.The service time for a message may depend on the state of the orderbooks when the message enters the match component, as well as thecontents, e.g., orders, that are in the message.

In one embodiment, orders in a message are considered to be “locked in”,or processed, or committed, upon reaching and entering the matchcomponent. If the terms of the aggressing order match a resting orderwhen the aggressing order enters the match component, then theaggressing order will be in one embodiment guaranteed to match.

As noted above, the latency experienced by a message, or the amount oftime a message spends waiting to enter the match component, depends uponhow many messages are ahead of that message (i.e., earlier messages),and how much time each of the earlier messages spends being serviced orprocessed by the match component. The amount of time a match componentspends processing, matching or attempting to match a message dependsupon the type of message, or the characteristics of the message. Thetime spent inside the processor may be considered to be a service time,e.g., the amount of time a message spends being processed or serviced bythe processor.

The number of matches or fills that may be generated in response to anew order message for a financial instrument will depend on the state ofthe data object representing the electronic marketplace for thefinancial instrument. The state of the match engine can change based onthe contents of incoming messages.

It should be appreciated that the match engine's overall latency is inpart a result of the match engine processing the messages it receives.The match component's service time may be a function of the message type(e.g., new, modify, cancel), message arrival rate (e.g., how many ordersor messages is the match engine module receiving, e.g., messages persecond), message arrival time (e.g., the time a message hits the inboundMSG or market segment gateway), number of fills generated (e.g., howmany fills were generated due to a given message, or how many ordersmatched due to an aggressing or received order), or number of Mass Quoteentries (e.g., how many of the entries request a mass quote).

In one embodiment, the time a message spends:

Being converted in the conversion component 402 may be referred to as aconversion time;

Waiting in the pre-match queue 404 may be referred to as a wait untilmatch time;

Being processed or serviced in the match component 406 may be referredto as a matching time;

Waiting in the post-match queue 408 may be referred to as a wait untilpublish time; and

Being processed or published via the publish component 410 may bereferred to as a publishing time.

It should be appreciated that the latency may be calculated, in oneembodiment, as the sum of the conversion time and wait until match time.Or, the system may calculate latency as the sum of the conversion time,wait until match time, matching time, wait until publish time, andpublishing time. In systems where some or all of those times arenegligible, or consistent, a measured latency may only include the sumof some of those times. Or, a system may be designed to only calculateone of the times that is the most variable, or that dominates (e.g.,percentage wise) the overall latency. For example, some marketparticipants may only care about how long a newly sent message that isadded to the end of the pre-match queue will spend waiting in thepre-match queue. Other market participants may care about how long thatmarket participant will have to wait to receive an acknowledgement fromthe match engine that a message has entered the match component. Yetother market participants may care about how much time will pass fromwhen a message is sent to the match engine's conversion component towhen match component results exit or egress from the publish component.

Global State Synchronization

As described above, users submit requests to the exchange computingsystem requesting that the exchange computing system perform atransaction, e.g., buy or sell a specified quantity of a financialinstrument. The exchange computing system processes each message in aFIFO manner, and that processing may include multiple sequential stages,or sub-processing, such as a primary (first) processing, a secondary(second) processing, etc. For example, the matching, or attempts tomatch, described above may be a first process performed by the exchangecomputing system. Determining implied opportunities based on the resultsof the first process, as described above, may be a second processperformed by the exchange computing system.

In one embodiment, a request message associated with an options contractmay cause the exchange computing system to calculate a plurality of,e.g., hundreds of, strike prices based on the single incoming request.Or, a request message that is a mass quote message may include multiplerequests to perform transactions. As the transaction processor (e.g.,the match engine) processes the requests in the mass quote message,other messages in the mass quote message may become inaccurate, i.e.,the request in the other message cannot be met because of messages inthe mass quote message that have already been processed. Any of theother downstream processes that are performed by the exchange computingsystem after matching/attempting to match incoming requests, e.g.,determining implied opportunities, calculating strike prices for anoptions contract, or processing multiple messages in a mass quotemessage, may be a secondary process, the performance of which may beoptimally interrupted/halted for efficiency and resource consumptionreduction purposes by implementing the disclosed embodiments.

Performance of the secondary processes may be valuable to the exchangecomputing system and to the users of the exchange computing system, butif those secondary processes become bottlenecks (e.g., the secondaryprocess receives tasks at a rate faster than the tasks can beperformed), their value diminishes. For example, performing thesecondary process causes a delay in reporting results of performing theprimary process. Moreover, in a system where users react to the resultspublished by the exchange computing system, if the results are delayed,they may no longer be actionable. For example, the exchange computingsystem transmits a market data feed, and users place additional ordersin response to the market data feed. However, if the market data feed isdelayed, users receive old, outdated information which may no longeraccurately represent the state of the market. These considerations areespecially important in time-sensitive applications, such as matchingrequests received from users and transmitting match results back to theusers.

As was noted above, a given change in the state of an electronicmarketplace can result in the generation of a significant amount ofmarket data for communication to market participants. Where the volumeof such data is low, there is little to no penalty in simplytransmitting all of the data as it is generated, i.e. in real time.However, when the volume of data is significant, or when the processingthat is required to be performed creates bottlenecks within the datatransaction processing system, the ability to avoid or delay processinginformation that is no longer actionable becomes important. Otherwise,the available network communications bandwidth may be quickly consumedby inaccurate information while newer/more accurate information waits inqueue to be processed/transmitted.

The disclosed embodiments relate to eliminating processing of messagesthat may no longer by actionable by market participants, therebyreducing the amount of computing resources expended by the exchangecomputing system, improving the response time for incoming messages, andreducing the usage of network resources by eliminating the volume ofincoming and outgoing messages. Although some of the examples describedherein refer to an exchange computing system, the disclosed embodimentsmay be applicable to any data transaction processing system thatincludes a pipelined, deterministic processing architecture, or at leastmultiple sequential processing stages, e.g., FIFO processing, where adelay in a downstream process may delay a higher priority, upstreamprocess, and where newly received transactions obviate the need fordownstream processing of older transactions.

Users may interact with the data transaction processing system bysubmitting transaction requests. The data transaction processing system,upon processing the transaction requests, generates results responsivethereto, which are output to the users via a data feed. The users, uponreceiving and consuming the results, may submit additional transactionsbased on the results, thereby resulting in a continuous or substantiallycontinuous data exchange of information that may build upon previoustransactions. As the volume of transaction requests increases, thesystem may experience a lag which causes a mismatch between theinformation received by the users and the actual system state of thedata transaction processing system. Users reacting to older informationmay submit transaction requests that are unactionable because therequests contained therein cannot be processed by the data transactionprocessing system, e.g., because the state of the data transactionprocessing system differs from what the users believe the state of thedata transaction processing system to be based on the older information.The global state synchronizer described herein can be implemented tospeed up data transaction processing system processing and eliminate orminimize transmission of inaccurate information, thereby improvingtechnical performance of the system and increasing system predictabilityand user satisfaction.

The data transaction processing system may be an exchange computingsystem, such as exchange computing system 100 illustrated in FIGS.5A-5E, which may include many of the components of exchange computingsystem 100 described in connection with FIG. 1. Example exchangecomputing system 100 processes electronic data transaction requestmessages, e.g., outright orders submitted by users/market participants,and generates market data, e.g., electronic data transaction resultmessages. Exchange computing system 100 transmits, via market datafeeds, information about processing of the outright orders to the marketparticipants. The exchange computing system also transmits, via themarket data feeds, information about implied orders generated from theoutright orders.

The exchange computing system includes multiple modules, such as matchengine module 106 and market data module 112, along with other modulesdescribed in connection with FIG. 1. The modules may be pipelined, sothat the outputs of one module may be input into another module.

In the example of FIG. 5A, exchange computing system 100 receiveselectronic data transaction request message 502A at time t=t0 from amarket participant. Message 502 may comprise a request to perform atransaction for a financial instrument A.

Match engine module 106 processes (i.e., matches, or attempts to match,as described above), request message 502A. Based on processingelectronic data transaction request message 502A (e.g., the primaryprocessing), the order book object for financial instrument A may needto be updated, e.g., the highest bid price for financial instrument Amay have changed. This change is made to the order book object for thefinancial instrument A, and this change needs to be reported/published,e.g., via an electronic data transaction result message output/generatedby the match engine module 106, namely, message 502B generated at timet=t1, as shown in FIG. 5B.

The exchange computing system 100 will eventually report message 502Bthrough market data feeds, and the users of the exchange computingsystem 100 may react to the report message 502B, such as by submittingadditional transaction requests/outright orders to the exchangecomputing system 100. However, the exchange computing system may performsome additional, or secondary, processing downstream of the match enginemodule 106 before the processing associated with message 502A isconsidered complete. As shown in FIG. 5C, the exchange computing system100 also includes an implied calculation engine 510, which determines ifimplied messages should be generated based on message 502B. In otherwords, message 502A, and/or its result 502B, may trigger processing inother modules in the exchange computing system, such as market datamodule 112. Result message 502B may be transmitted to impliedcalculation engine 510.

Market data module 112 also includes a market data generator 512, acomponent within the market data module 112 that prepares messages to bepublished, e.g., in the proper format, and publishes the messages via amarket data feed. Because message 502B will be reported out to themarket participants, message 502B is also transmitted to market datagenerator 512, as shown in FIG. 5C.

Market participants expect to receive, or be informed of, all eventsassociated with processing of a given request message before receivinginformation about processing another request message. Otherwise, themarket participants would receive incomplete information about theeffects of processing the given request message. Accordingly, theexchange computing system reports all result messages based on a requestmessage together. Therefore, message 502B must wait at the market datagenerator 512 until implied calculation engine completes itscalculations based on 502B.

As discussed above in the discussion regarding implication, the exchangecomputing system may calculate and publish implied liquidity, whichincreases the number of trading opportunities for market participants.Financial instrument A may be a constituent financial instrument in aspread financial instrument, such as a calendar spread involving twodifferent delivery dates for financial instrument A. Or, financialinstrument A may be a constituent financial instrument in a spreadinstrument AB involving financial instrument A and financial instrumentB. The exchange computing system may imply liquidity for spreadinstrument AB based on message 502B. Accordingly, the change to theorder book object for financial instrument A may also cause impliedcalculation engine 510 to calculate implied liquidity based on message502B.

More specifically, the implied calculation engine 510 may perform aseries of calculations for each spread instrument associated withfinancial instrument A. In other words, if financial instrument A is aconstituent financial instrument for one hundred spread instruments (andif the exchange computing system calculates implied liquidity based oneach of those hundred spread instruments), the implied calculationengine 510 may perform one hundred separate implied liquiditycalculations before publishing any of the result messages.

As shown in FIG. 5D, implied calculation engine 510 may generate impliedmessages 502C, 502D and 502E at times t=t2, t3 and t4, respectively.While implied calculation engine 510 is generating implied messagesbased on message 502B, message 502B will wait to be published, so thatall the messages generated by the exchange computing system in responseto processing message 502A are published to market participantstogether, or at least in order before the results of processing someother request message are published. Message 502B accordingly waits tobe published until the implied calculation engine finishes calculatingimplied messages based on message 502B.

As described above, identifying implied opportunities may becomputationally intensive, and determining and calculating all of theimplied messages that need to be generated due to the change in theorder book object for financial instrument A could require multiplecalculations. Referring back to FIG. 5D, the exchange computing systemmay receive electronic data transaction request message 504A while theimplied calculation engine 510 is generating implied messages based onmessage 502B, e.g., at time t=t2. Message 504A may, like message 502A,comprise a request to perform a transaction for a financial instrumentA. More particularly, message 504A may materially affect the order bookobject for financial instrument A. A message may “materially affect” theorder book object for financial instrument if the message affects thetop-N price levels for which the exchange computing system publishesmarket data. For example, message 504A may materially affect the orderbook object for financial instrument A if processing of message 504A (bythe match engine module 106):

causes the best bid price for financial instrument A to change;

adds quantity to the a price level created by message 502A; or

improves the best price level for financial instrument A.

It should be appreciated that the exchange computing system may definethe rules and conditions for when a message materially affects the orderbook object for a financial instrument, such that a message currentlybeing processed by a secondary process is considered to be outdated,which may then trigger the disclosed embodiments to interrupt, or halt,processing of the outdated message.

As shown in FIG. 5D, the match engine module 106 may generate a resultmessage, such as a message 504B at time t=t3 in response to processingof request message 504A. Message 504B, like message 502B, reports on thenewest/latest order book object for financial instrument A.

However, because of the FIFO processing rules of the exchange computingsystem, and because the exchange computing system publishes all resultmessages based on message 502A before publishing result messages basedon message 504A, the market data module 112 does not actually publishmessage 504B until implied calculation engine 510 completes calculatingimplied messages based on 502B. Implied calculation engine also does notbegin calculating implied liquidity based on 504B until impliedcalculation engine has finished calculating implied liquidity based on502B. And, messages resulting from the processing of 504A (namely, 504Band implied messages for 504B) cannot be published until impliedcalculation engine 510 market data generator 512 publishes 502B, 502C,502D, and 502E. It should accordingly be appreciated that the impliedcalculation engine may become a bottleneck within the exchange computingsystem 100.

After the implied calculation engine 510 completes calculating impliedmessages 502C-E, the exchange computing system 100 publishes allmessages generated in response to message 502A. As shown in FIG. 5E,messages 502B, 502C, 502D and 502E are then published by market datagenerator 512 via market data feed at time t=t5. Message 504B is thentransmitted to the implied calculation engine 510 at time t=t6. Itshould be appreciated that in the disclosed examples, timestamps t0, t1,. . . , t6 represent increasing times, e.g., t6 is later than t5, whichis later than t4, which is later than t3, which is later than t2, whichis later than t1, which is later than t0.

The bottleneck at the implied calculation engine, where a queue ofmessages builds up because the implied calculation engine cannot processmessages as quickly as they are received, causes an information lag ordelay which may undermine the goals of the exchange computing system andmay cause customer dissatisfaction. In particular, when the exchangecomputing system receives message 504A, which represents a new requestcompared to 502A for the same financial instrument, message 502A becomesoutdated. Results from the processing of message 502A, which representthe state of the order book for financial instrument A at the time 502Awas processed, are accordingly also outdated because the match enginemodule 106 has begun processing message 504A. These results from theprocessing of message 502A may not be actionable, because they representthe state of a market at an earlier time, before message 504A changedthat market. In other words, the results of message 502A, transmitted tomarket participants via the market data feeds, advertise a market stateor trading opportunities related to financial instrument A which are notactually available for trading (because processing of message 504A haschanged the state of the market for financial instrument A).

In a high performance trading system where low transaction latency isimportant, it may be important to calculate, identify and advertiseimplied opportunities quickly so as to improve or maintain marketparticipant interest and/or market liquidity.

The disclosed systems and methods include a lookback feature that enablea downstream process, which may be bottlenecked, to determine that thedownstream process is processing outdated messages. The disclosedsystems and methods may further interrupt, or halt, processing of theoutdated messages, so that the process can turn to processing newermessages. The disclosed embodiments may alternatively deprioritizeprocessing of the outdated messages, so that the newer messages areprocessed first, i.e., although the system is typically designed to beperformed in a FIFO manner, in some instances, messages determined to beoutdated may be processed out of order, i.e., later than later-receivedmessages.

FIG. 6 illustrates an example exchange computing system 100 includingglobal state synchronizer 602. The lookback feature, which may beimplemented as global state synchronizer 602 in the exchange computingsystem 100, enables the market data module 112 to interruptcalculation/identification of implied opportunities based on a messageif it is determined that the message is outdated.

Global state synchronizer 602, which may be implemented as a separatecomponent or as one or more logic components, such as on an FPGA whichmay include a memory or reconfigurable component to store logic andprocessing component to execute the stored logic, e.g. computer programlogic, stored in a memory 204, or other non-transitory computer readablemedium, and executable by a processor 202, such as the processor 202 andmemory 204 described with respect to FIG. 2, to cause the processor 202to generate a key for each result message. The key may be based oncharacteristics of the response message. For example, if the responsemessage is an update to the best price level for the order book objectfor financial instrument A, then the key generated by the global statesynchronizer 602 may be in the format: <financialinstrument-pricelevel=1>.

The global state synchronizer 602 may additionally generate and assign aunique global identifier to each response message generated by the matchengine module 106. The global state synchronizer 602 stores, in a memoryassociated with the exchange computing system, the key and identifierfor each response message. In one embodiment, the key for a responsemessage may include additional information associated with the responsemessage, such as the transaction type (e.g., relinquish or acquire), andthe current best price to buy or sell a quantity of the financialinstrument. As will be described below, the key may be used to look upthe most recent response message that materially affects the state ofthe order book object for the financial instrument A. Accordingly, theglobal state synchronizer 602 may be configured to generate a key basedon the rules and conditions defined by the exchange computing system tomaterially affect the order book object for a financial instrument.

It should be appreciated that the exchange computing system may generatethe same key for different electronic data transaction result messages,but the identifiers for the different electronic data transactionrequest messages will be different because the identifiers are uniquefor each electronic data transaction result message. Accordingly,another message that materially affects the state of an order bookobject would have the same key as a previous message for the order bookobject.

The key is accordingly indicative of a relationship between twodifferent electronic data transaction result messages, e.g., two relatedmessages may have the same key. For example, two different resultmessages that relate to the same financial instrument, transaction type,and price level would have the same key. One of the disclosedembodiments relates to halting/interrupting a plurality of calculationsperformed by a downstream process when a result message generated by afirst process has the same key, but a different identifier, than aresult message being processed by a second, downstream process in a FIFOsystem.

As discussed above, each financial instrument offered by or madeavailable for trading by the exchange computing system is associatedwith an order book object. The global state synchronizer 602 stores thekey and identifier for each different financial instrument/order bookobject.

The implied calculation engine 510 receives response messages andcalculates all the implied messages based on the response message. Whenthe global state synchronizer 602 is implemented in an exchangecomputing system, the implied calculation engine may be configured tocommunicate with the global state synchronizer 602 after eachcalculation to determine if the global state synchronizer 602 contains anew or updated message for the key (e.g., financial instrument,transaction type, and price level) associated with the response messagecurrently being processed by the implied calculation engine, e.g.,checks if the global state synchronizer 602 contains a new globalidentifier for the financial instrument, transaction type, and pricelevel compared to the global identifier associated with the responsemessage being processed by the implied calculation engine.

If the identifier in the global state synchronizer 602 is the same asthe identifier associated with the message being processed by theimplied calculation engine, the implied calculation engine proceeds withperforming calculations for the message being processed. However, if theidentifier in the global state synchronizer 602 differs from theidentifier associated with the message being processed by the impliedcalculation engine, the implied calculation engine interrupts or haltsprocessing of the message being processed by the implied calculationengine.

Interrupting or halting processing of the outdated messages reduces theamount of computing resources that are expended for useless/unnecessarycalculations by the exchange computing system. As described above, anexchange computing system generates a voluminous amount of market datawhich reflects the current state of the market for thousands offinancial instruments, and provides this information to marketparticipants via market data feeds. Traders and market participants relyon market data feeds to understand the state of the market for one ormore financial instruments at a given moment in time, e.g., the present,at a past time period, or relative between multiple time periods. Marketparticipants may formulate their trading strategies based on the marketdata feeds. If the information being generated is based on outdatedmessages, the information would also be inaccurate. Market participantswould in effect be responding to messages that will result in ordersthat cannot be satisfied, because the state of the market has alreadychanged. By interrupting processing of outdated messages (even beforeall the implied messages for a given response message have beencalculated), the disclosed embodiments reduce the amount of computingresources wasted on calculating inaccurate, and ultimately useless,information.

Another advantageous effect of the disclosed embodiments is thatinterrupting/halting processing of outdated messages reduces the numberof implied messages based on outdated messages that are published, viamarket data feeds, by the exchange computing system, thereby reducingthe usage of network resources associated with publishing market datafeeds.

Eliminating, or reducing, the amount of messages that are ultimatelyunactionable (because they were inaccurate) also reduces the number ofmarket participant messages, e.g., new electronic data transactionrequest messages, submitted by market participants in response thereto,thereby reducing the load on network resources between marketparticipants and the exchange computing system Eliminating inaccuratemessages also decreases unpredictability because users no longer submittransactions in response to inaccurate messages, thereby improvingmarket participant satisfaction. Otherwise, a user would not find outthat the information was inaccurate until much later, after the user hadalready submitted transactions in response to the received (inaccurate)messages.

In one embodiment, after interrupting processing of the message beingprocessed, the implied calculation engine begins processing the newlyreceived message, i.e., the response message associated with the globalidentifier in the global state synchronizer 602 that was found to bedifferent from the message whose processing was interrupted. Because thedisclosed embodiments enable the exchange computing system tointerrupt/halt outdated messages, the disclosed embodiments alsoincrease the speed with which the implied calculation engine canreceive, and process, newly received messages, thereby decreasing theoverall latency/response time of the exchange computing system. Theprocessing speed of data transaction processing systems depends on thevolume and the types of transactions being handled. The data transactionprocessing system may be configured to concurrently process a limitednumber of received transactions in a FIFO manner, e.g., each incomingelectronic data transaction request message is processed in the order ofreceipt, and messages responsive thereto (both electronic datatransaction result message and associated implied messages) are alsogenerated/published in the same order. A stage in that process may be abottleneck, or a stage of a multi-stage application that requires themost amount of time to process, or causes a higher than expected delayin the overall response time of the process. For example, the impliedcalculation engine may be a bottleneck for the market data module 112,because one electronic data transaction result message may result inhundreds or thousands of implied messages. In software engineering,application performance improvement can be achieved by reducing overallmessage processing latency. Improving the performance of bottleneckedstages maximizes the corresponding improvement in applicationperformance. The disclosed embodiments reduce the amount of workperformed by the implied calculation engine, thereby decreasing theoverall latency/response time of the exchange computing system.

FIG. 7 illustrates a block diagram of a data transaction processingsystem 700 including FIFO pipelined processing components. Datatransaction processing system 700 includes an upstream processor 702communicatively coupled to a memory 704, a downstream processor 706communicatively coupled to a memory 708, and a global state synchronizer710. Global state synchronizer 710 may be similar to global statesynchronizer 602 described above. System 700 is a FIFO system whereincoming messages are processed by the upstream processor 702, andresults output from upstream processor 702 are input into downstreamprocessor 706.

Upstream processor 702 receives a plurality of electronic datatransaction request messages, each electronic data transaction requestmessage comprising a request to perform a transaction on a data object,and, for each electronic data transaction request message, generates anelectronic data transaction result message in response to processing theelectronic data transaction request message. The global statesynchronizer 710 generates, for the electronic data transaction resultmessage, a key based on the electronic data transaction result messageand an identifier unique to the electronic data transaction resultmessage and stores the key and the identifier in the memory 704. Theupstream processor 702 then forwards the electronic data transactionresult message and the key and the identifier for the electronic datatransaction result message to the downstream processor 706.

For each electronic data transaction result message corresponding to anelectronic data transaction request message, the global statesynchronizer 710 stores the key and the identifier associated with theelectronic data transaction result message in the memory 708. For eachelectronic data transaction result message, the downstream processor 706identifies a plurality of data objects related to the data objectassociated with the corresponding electronic data transaction requestmessage and performs a calculation for at least one of the plurality ofrelated data objects. After each calculation that is performed by thedownstream processor 706, the global state synchronizer 710 retrieves,from memory 704, an identifier associated with a key equal to the keystored in memory 708; determines if the identifier retrieved from memory704 is equal to the identifier stored in memory 708; and upondetermining that the identifier retrieved from memory 704 is not equalto the identifier stored in memory 708, causes the downstream processor706 to interrupt performing calculations for the related data objects.

It should be appreciated that the two processors 702 and 706 areprocessing different (albeit related) messages, and may experiencevarying latencies. If downstream processor 706 is a bottleneck, asdescribed above, processor 706 may be processing messages based onmemory 708 which may be outdated, i.e., a new identifier has been storedin memory 704 for a new message that materially affects the messagecurrently being processed by downstream processor 706. The disclosedsystems and methods enable downstream processor 706 to interruptprocessing of outdated messages, begin processing messages received fromupstream processor 702 (thereby reducing the overall latency of thesystem), and reduce the number of inaccurate messages that aretransmitted out of the data transaction processing system.

In a FIFO, pipelined processing system, the memory architecture may beconfigured for optimization/efficiency of the different processingstages. For example, referring back to FIG. 7, processor 702 andprocessor 706 may be configured to use separate memories 704 and 708,respectively. Messages are processed by upstream processor 702, theresults of which are fed to downstream processor 706. If a messagereceived by upstream processor 702 (the information for which is storedin memory 704) obviates the needs to process a message currently beingprocessed by downstream processor 706 (the information for which isstored in memory 708), there is no way for downstream processor 706 tobe made aware that the message in memory 708 has been obviated unlessthe global state synchronizer 710 provides such synchronization of thememory states associated with the two different pipelined processes. If,however, the memory architecture of system 700 were modified to allowboth processor 702 and processor 706 to access a same shared memory, thesystem would need to allow two different processes to read/write from asame memory, such as by locking operations for one process while anotherprocess is writing to or reading from that memory. Such lockingtechniques would make both processes more inefficient, e.g., because oneprocess would have to wait for the other process to finish executing itsmemory related tasks.

FIG. 8 illustrates an example flowchart of an example computerimplemented method 800 of interrupting processing of electronic datatransaction messages in a data transaction processing system.Embodiments may involve all, more or fewer actions than the illustratedactions. The actions may be performed in the order or sequence shown, orin a different sequence. The actions may be performed simultaneously, orin a parallel or overlapping fashion. The method may be performed byprocessing logic that may comprise hardware (circuitry, dedicated logic,etc.), software, or a combination of both. In one example, the method isperformed by the computer system 100 of FIG. 1, while in some otherexamples, some or all of the method may be performed by another machine.

At step 802, method 800 includes receiving a plurality of electronicdata transaction request messages, each electronic data transactionrequest message comprising a request to perform a transaction on a dataobject. In one embodiment, each electronic data transaction requestmessage further comprises a requested value and a requested quantity.For example, an exchange computing system implementing method 800 mayreceive transaction requests from market participants requesting aquantity of a financial instrument (represented by a data object) at aspecified value.

For each electronic data transaction request message, method 800includes performing several steps 804, 806 and 808. In particular, atstep 804, method 800 includes generating an electronic data transactionresult message in response to processing the electronic data transactionrequest message. In one embodiment, processing an electronic datatransaction request message comprises determining whether an attempt tomatch an electronic data transaction request message with at least onepreviously received but unsatisfied electronic data transaction requestmessage for a transaction which is counter thereto results in at leastpartial satisfaction of one or both of the electronic data transactionrequest message and the at least one previously received but unsatisfiedelectronic data transaction request message.

In one embodiment, processing an electronic data transaction requestmessage for a data object results in a modification to the data object,and wherein an electronic data transaction result message correspondingto the electronic data transaction request message includes dataindicating the modification to the data object.

In one embodiment, each electronic data transaction result messagecorresponding to an electronic data transaction request messagecomprises information regarding a state of the data object associatedwith the electronic data transaction request message. For example, inone embodiment, a state of a data object, such as a financialinstrument, comprises a transaction type, a resulting value and aresulting quantity. The resulting value and resulting quantity may bethe result of processing the electronic data transaction requestmessage. As described above, market participants may use informationabout the state of a market for a financial instrument to submitadditional transactions to the exchange computing system.

At step 806, method 800 includes generating for the electronic datatransaction result message, a key based on the electronic datatransaction result message and an identifier unique to the electronicdata transaction result message.

At step 808, method 800 includes storing the key and the identifier in afirst memory coupled to the processor.

For each electronic data transaction result message corresponding to anelectronic data transaction request message, method 800 includesperforming several steps 810, 812, 814, 816, 818 and 820. In particular,at step 810, method 800 includes storing the key and the identifierassociated with the electronic data transaction result message in asecond memory coupled to the processor.

At step 812, method 800 includes identifying a plurality of data objectsrelated to the data object associated with the corresponding electronicdata transaction request message.

At step 814, method 800 includes performing a calculation for at leastone of the plurality of related data objects.

An exchange computing system that implements method 800 may calculateimplied opportunities as described above, such as, for example, byidentifying other financial instruments for which the target financialinstrument (i.e., in the request message) is a constituent financialinstrument, and by calculating/identifying implied opportunities foreach such other financial instrument.

Method 800 includes, after each calculation that is performed, at step816, retrieving from the first memory, an identifier associated with akey equal to the key stored in the second memory.

At step 818, method 800 includes determining if the identifier retrievedfrom the first memory is equal to the identifier stored in the secondmemory.

At step 820, method 800 includes upon determining that the identifierretrieved from the first memory is not equal to the identifier stored inthe second memory, interrupting performing calculations for the relateddata objects.

As described above, the disclosed systems and methods may beimplementing to interrupt processing of an electronic data transactionrequest message that is outdated. Interrupting processing of theoutdated messages reduces the amount of computing resources that areexpended for useless/unnecessary calculations by the exchange computingsystem. Interrupting processing of outdated messages reduces the numberof implied messages based on outdated messages that are published, viamarket data feeds, by the exchange computing system, thereby reducingthe usage of network resources associated with publishing market datafeeds. Eliminating, or reducing, the amount of messages that areultimately unactionable (because they were inaccurate) also reduces thenumber of market participant messages, e.g., new electronic datatransaction request messages, submitted by market participants inresponse thereto, thereby reducing the load on network resources betweenmarket participants and the exchange computing system

In one embodiment, the message for which processing is interrupted isdiscarded by the exchange computing system. Alternatively, theprocessing that is interrupted may be resumed at a later time, e.g.,de-prioritized, or moved to an out-of-band feed. In particular, theexchange computing system may de-prioritize messages by processing themafter peak hours, or when the implied calculation engine is idle. Theresults of the de-prioritized processing may be provided to marketparticipants at a later time. Some market participants may choose torecreate the exchange computing system's order book objects on their ownsites/systems, e.g., to reconcile the exchange computing system'sactivities with their own internal records. Such customers may need theresults of the implied calculation engine even for outdated messages.However, unlike market data feeds for actionable/valid implied messages,implied messages based on outdated messages may not be time-sensitive.The exchange computing system may therefore calculate and publish suchimplied messages based on outdated messages on a delayed schedulewhenever computing and/or network resources are idle or not overlyutilized. Instead of calculating and publishing outdated messages, theexchange computing system may publish a lightweight, compact messagethat indicates that implied calculations based on outdated messages weresuppressed, and/or may be available at a later, de-prioritized time.

In one embodiment, method 800 additionally includes, upon determiningthat the identifier retrieved from the first memory is not equal to theidentifier stored in the second memory, for another electronic datatransaction result message corresponding to another electronic datatransaction request message: storing, by the processor, the key and theidentifier associated with the another electronic data transactionresult message in the second memory; identifying, by the processor, aplurality of data objects related to the data object associated with thecorresponding another electronic data transaction request message; andperforming, by the processor, a calculation for at least one of theplurality of related data objects.

In one embodiment, method 800 additionally includes, after performingthe calculation for the another electronic data transaction resultmessage, resuming, by the processor, performing the interruptedcalculations.

In one embodiment, the electronic data transaction result message is aprimary electronic data transaction request message, the method furthercomprising generating, by the processor, secondary electronic datatransaction result messages based on the performed calculations.

In one embodiment, method 800 additionally includes transmitting, by theprocessor, over the data communications network, the primary andsecondary electronic data transaction result messages.

CONCLUSION

The illustrations of the embodiments described herein are intended toprovide a general understanding of the structure of the variousembodiments. The illustrations are not intended to serve as a completedescription of all of the elements and features of apparatus and systemsthat utilize the structures or methods described herein. Many otherembodiments may be apparent to those of skill in the art upon reviewingthe disclosure. Other embodiments may be utilized and derived from thedisclosure, such that structural and logical substitutions and changesmay be made without departing from the scope of the disclosure.Additionally, the illustrations are merely representational and may notbe drawn to scale. Certain proportions within the illustrations may beexaggerated, while other proportions may be minimized. Accordingly, thedisclosure and the figures are to be regarded as illustrative ratherthan restrictive.

While this specification contains many specifics, these should not beconstrued as limitations on the scope of the invention or of what may beclaimed, but rather as descriptions of features specific to particularembodiments of the invention. Certain features that are described inthis specification in the context of separate embodiments can also beimplemented in combination in a single embodiment. Conversely, variousfeatures that are described in the context of a single embodiment canalso be implemented in multiple embodiments separately or in anysuitable sub-combination. Moreover, although features may be describedas acting in certain combinations and even initially claimed as such,one or more features from a claimed combination can in some cases beexcised from the combination, and the claimed combination may bedirected to a sub-combination or variation of a sub-combination.

Similarly, while operations are depicted in the drawings and describedherein in a particular order, this should not be understood as requiringthat such operations be performed in the particular order shown or insequential order, or that all illustrated operations be performed, toachieve desirable results. In certain circumstances, multitasking andparallel processing may be advantageous. Moreover, the separation ofvarious system components in the described embodiments should not beunderstood as requiring such separation in all embodiments, and itshould be understood that the described program components and systemscan generally be integrated together in a single software product orpackaged into multiple software products.

One or more embodiments of the disclosure may be referred to herein,individually and/or collectively, by the term “invention” merely forconvenience and without intending to voluntarily limit the scope of thisapplication to any particular invention or inventive concept. Moreover,although specific embodiments have been illustrated and describedherein, it should be appreciated that any subsequent arrangementdesigned to achieve the same or similar purpose may be substituted forthe specific embodiments shown. This disclosure is intended to cover anyand all subsequent adaptations or variations of various embodiments.Combinations of the above embodiments, and other embodiments notspecifically described herein, will be apparent to those of skill in theart upon reviewing the description.

The Abstract of the Disclosure is provided to comply with 37 C.F.R. §1.72(b) and is submitted with the understanding that it will not be usedto interpret or limit the scope or meaning of the claims. In addition,in the foregoing Detailed Description, various features may be groupedtogether or described in a single embodiment for the purpose ofstreamlining the disclosure. This disclosure is not to be interpreted asreflecting an intention that the claimed embodiments require morefeatures than are expressly recited in each claim. Rather, as thefollowing claims reflect, inventive subject matter may be directed toless than all of the features of any of the disclosed embodiments. Thus,the following claims are incorporated into the Detailed Description,with each claim standing on its own as defining separately claimedsubject matter.

It is therefore intended that the foregoing detailed description beregarded as illustrative rather than limiting, and that it be understoodthat it is the following claims, including all equivalents, that areintended to define the spirit and scope of this invention.

1. A computer implemented method comprising: receiving, by a processor,a first electronic data transaction request message comprising a requestto perform a transaction on a data object and, based thereon, processingthe first electronic data transaction message to generate a firstelectronic data transaction result message; performing, by the processorsubsequent to the processing, a plurality of calculations based on thedata object; receiving, by the processor during the performing, a secondelectronic data transaction request message for processing therebycomprising a request to perform another transaction on the data objectand, based thereon, processing the second electronic data transactionmessage to generate a second electronic data transaction result message;and interrupting, by the processor, prior to the completion of theplurality of calculations, based the first and second electronic datatransaction request messages both requesting to perform a transaction onthe data object and the first electronic data transaction result messagebeing different from the second electronic data transaction resultmessage, the performance of the plurality of calculations.
 2. Thecomputer implemented method of claim 1, wherein the processing of thefirst electronic data transaction request message comprises storingfirst key data and a first identifier unique to the first electronicdata transaction result message in a memory coupled with the processor,the processing of the second electronic data transaction request messagecomprises storing second key data and a second identifier unique to thesecond electronic data transaction result message in the memory, and theinterrupting is further based on the stored first key data matching thestored second key data and stored first identifier not matching thestored second identifier.
 3. The computer implemented method of claim 1,wherein the interruption of the performance of the plurality ofcalculations enables the processor to process a subsequently receivedelectronic data transaction request message the processor could notprocess while performing the plurality of calculations.
 4. The computerimplemented method of claim 1 further comprising resuming, by theprocessor at a subsequent time, the performance of the plurality ofcalculations.
 5. The computer implemented method of claim 1, whereineach of the first and second electronic data transaction result messagescomprise information regarding a state of the data object associatedwith the first and second electronic data transaction request messagesrespectively.
 6. The computer implemented method of claim 5, wherein astate of a data object comprises a transaction type, a resulting valueand a resulting quantity.
 7. The computer implemented method of claim 5,wherein each of the first and second electronic data transaction requestmessages further comprise a requested value and a requested quantity. 8.The computer implemented method of claim 1, wherein the processing ofeach of the first and second electronic data transaction requestmessages comprises determining by a hardware matching processor whetheran attempt to match the first or second electronic data transactionrequest message with at least one previously received but unsatisfiedelectronic data transaction request message for a transaction which iscounter thereto results in at least partial satisfaction of one or bothof the first or second electronic data transaction request message andthe at least one previously received but unsatisfied electronic datatransaction request message.
 9. The method of claim 6, wherein theprocessor is comprised by an exchange computing system, and wherein thedata object represents a financial instrument traded on the exchangecomputing system.
 10. A system comprising: computer executableinstructions stored in a memory coupled with a processor and comprisinginstructions that when executed by the processor, cause the processorto: receive a first electronic data transaction request messagecomprising a request to perform a transaction on a data object and,subsequent thereto, receive a second electronic data transaction requestmessage comprising a request to perform a transaction on the dataobject; and process each of the first and second electronic datatransaction request messages to generate first and second electronicdata transaction result messages respectively; perform, subsequent tothe processing of the first electronic data transaction request message,a plurality of calculations based on the data object of the electronicdata transaction request message; and interrupt, prior to the completionof the plurality of calculations, the performance of the plurality ofcalculations based the first and second electronic data transactionrequest messages both requesting to perform a transaction on the dataobject and the first electronic data transaction result message beingdifferent from the second electronic data transaction result message.11. The system of claim 10 where the processing of the first and secondelectronic data transaction request messages comprises the storage, in amemory coupled with the processor, of first key data and a firstidentifier unique to the first electronic data transaction resultmessage and second key data and a second identifier unique to the secondelectronic data transaction result message, and wherein the processorinterrupts the performance of the plurality of calculations based on thestored first key data matching the stored second key data and storedfirst identifier not matching the stored second identifier
 12. Thesystem of claim 10, wherein the memory further comprises instructionsthat when executed by the processor, cause the processor to resume, at asubsequent time, the performance of the plurality of calculations. 13.The system of claim 10, wherein the electronic data transaction resultmessage corresponding to an electronic data transaction request messagecomprises information regarding a state of the data object associatedwith the electronic data transaction request message.
 14. The system ofclaim 13, wherein a state of a data object comprises a transaction type,a resulting value and a resulting quantity.
 15. The system of claim 13,wherein each electronic data transaction request message furthercomprises a requested value and a requested quantity.
 16. The system ofclaim 10, wherein the processing of each of the first and secondelectronic data transaction request message comprises a determination bya hardware matching processor whether an attempt to match the first orsecond electronic data transaction request message with at least onepreviously received but unsatisfied electronic data transaction requestmessage for a transaction which is counter thereto results in at leastpartial satisfaction of one or both of the first or second electronicdata transaction request message and the at least one previouslyreceived but unsatisfied electronic data transaction request message.17. The system of claim 10, wherein the system is an exchange computingsystem, and wherein the data object represents a financial instrumenttraded on the exchange computing system.
 18. The system of claim 10,wherein the interruption of the performance of the plurality ofcalculations enables the processor to process a subsequently receivedelectronic data transaction request message the processor could notprocess while performing the plurality of calculations.
 19. A systemcomprising: means for receiving a first electronic data transactionrequest message comprising a request to perform a transaction on a dataobject and, based thereon, processing the first electronic datatransaction message to generate a first electronic data transactionresult message; means for performing, subsequent to the processing, aplurality of calculations based on the data object of the firstelectronic data transaction request message; means for receiving, duringthe performing, a second electronic data transaction request message forprocessing thereby comprising a request to perform another transactionon the data object and, based thereon, processing the second electronicdata transaction message to generate a second electronic datatransaction result message; and means for interrupting, prior to thecompletion of the plurality of calculations, based the first and secondelectronic data transaction request messages both requesting to performa transaction on the data object and the first electronic datatransaction result message being different from the second electronicdata transaction result message, the performance of the plurality ofcalculations.
 20. The system of claim 19, wherein the means forprocessing of the first electronic data transaction request messagefurther comprises means for storing first key data and a firstidentifier unique to the first electronic data transaction resultmessage in a memory coupled with the processor, the means for processingof the second electronic data transaction request message furthercomprises means for storing second key data and a second identifierunique to the second electronic data transaction result message in thememory, and the means for interrupting is further based on the storedfirst key data matching the stored second key data and stored firstidentifier not matching the stored second identifier.